ALTEO Group Sustainability Report 2016

ALTEO Group

Sustainability Report

2016

Table of Contents

I. Letter from the CEO 3II: Highlights 5III. About the Report 7Certification 11

IV. Operating environment 14Global energy sector 16Energy Strategies 17Renewable Energy 19

V. About the Company 20Company history 21

ALTEO Group 22Company Structure 24Strategy and values 25Organizational operation 28

Organizational Structure 28Corporate Governance 29Integrated Management System 31Compliance 34

Products and Services 38Power Generation 38

Energy trading 42Energy services 44

Value Chain 45

VI. Sustainability performance 46Economic performance 47

Economic performance 48Production 52Indirect economic effects 55

Environmental Performance 59Use of energy sources 59Emission 65Air Cleanness protection 68Water consumption 71Soil and water protection 73Waste management 74Environmental compliance 75

Social performance 78The owner 78Clients 79Suppliers, sub-contractors 81Employees 82Local communities 85

State and authorities 87Media contacts 87Professional contacts 87

VII. Our undertakings 90VIII. GRI Index 92

ALTEO Group Sustainability Report 2016


I. LETTER FROM THE CEO

4


LETTER FROM THE CEO | HIGHLIGHTS | ABOUT THE REPORT | OPERATING ENVIRONMENT | ABOUT THE COMPANY | SUSTAINABILITY PERFORMANCE | OUR UNDERTAKINGS | GRI INDEX

2016 was all about the collision of the contradic-

tory social and political impacts of globalisation,

of which one manifestation was Brexit. As the

Paris Agreement and the following COP 22 results

have shown, the international community realized

that Climate Change can only be tackled by har-

monizing the environmental objectives with the

Sustainable Development Goals in place. In what-

ever direction we are heading, the importance

of sustainability – which is one of the strongest

symbols of responsible economical and modern

social thinking – is now an unavoidable, inter-

national goal that is generally accepted by the

public.

New trends are opening new opportunities for all

economic actors, including enterprises. Closing a

successful year on the energy market, ALTEO has

arrived at the moment when customized renew-

able energy solutions are becoming competitive

alternatives to traditional solutions. My experience

show me that environmental consciousness is

more present than ever in corporate culture as

well as in everyday thinking. From the beginning,

ALTEO’s main goal has been to build success on

sustainability. The most important element of

achieving this goal is to continuously increase

the share of energy produced either from re-

newable sources or from highly efficient cogen-

eration technology, whilst always considering

our clients’ needs (individual needs and capabil-

ities). We are committed to conducting transparent

and trustworthy business, therefore we published

our first Ethical Codex in January 2016, and devel-

oped our Integrated Management System, which

includes the Energy Management System as well.

We are proud to operate in compliance with all

legal and environmental regulations and that we

have had no serious work accidents in 2016.

LETTER FROM THE CEO

Dear Reader,

“My experience show me that environmental consciousness is more present than ever in corporate culture as well as in everyday thinking.”

Attila Chikán Jr., CEO of ALTEO Nyrt.

5



The acquisition of Sinergy Group in 2015 laid the

basis of the company’s development in 2016.

Consequently, we have widened our range of

activities and experiences. Proving we are on the

right track to fulfilling our strategic goals, we

launched our initial public offering (IPO) in the

fall of 2016. Our vision was well received: pri-

vate and institutional investors underwrote a

total of approximately HUF 1.4 billion worth of

shares. Now, we are focusing on achieving appro-

priate share liquidity. Regarding this, my personal

creed focusses beyond the urge to look for finan-

cial return on investments, supporters of sustaina-

bility should also think about investing in ALTEO.

Naturally, the success of a business enterprise is

best expressed in numbers. Last year, Audi Hungar-

ia, MOL Petrolkémia and Sopron Holding extended

their contracts with us by five more years each. In

addition, ALTEO Group designed and built the re-

newable energy system for the largest BMW store

in Central Europe. And our active investment policy

led to an increase in our figures in 2016: our EBITDA

margin grew by 62%, while our turnover improved by

33%. This year marks the beginning of a dynamic pe-

riod: in the next two years, we are planning to invest

HUF 15 billion, focusing on renewables and in ensur-

ing that we provide professional services to fulfil the

special and economic needs of our customers.

As company CEO, I am happy to say that we have

again been successful in shaping the image of

ALTEO, as defined at its foundation, an image

which fits our sustainability value system. We

are lucky, because our personal convictions are

in line with the company’s strategic and financial

goals – therefore we can work to further base our

business success on sustainability, which, I believe,

is in the common interest of all.

Attila Chikán Jr.,

CEO of ALTEO Nyrt.

II. HIGHLIGHTS

7


HIGHLIGHTS

Publication of our first Code of Ethics

The sales of retail electric energy

increased by 11%

300 persons participated at the ALTEO Family Day

We have contributed to the elimination of 3200 tons

of carbon dioxide emission in the BC- Power Plant

17% of our built-in electricity capacity is generated

by renewable power plants

The number of our employees increased by 7%

We conducted

26internal audits

In our Integrated Management System

150 of ALTEO Group’s partner companies were certified

20,5% of ALTEO Group’s shares is free float

The Tisza-WTP Water treatment plant treats 3,5 million m3 industrial water annually

97% of our suppliers are Hungarian firms

97%The general availability of our power plants was above 96% on average

96%

150


III. ABOUT THE REPORT

9


ABOUT THE REPORT

This document is the first Sustainability Report of

ALTEO Energy Services Public Limited Company

(referred to as ALTEO Plc. or the Company) and its

consolidated subsidiaries (henceforth referred to

as ALTEO Group). With the document we confirm

our commitment to sustainability and transparency.

The purpose of this document was to provide useful

information to all our stakeholder groups. Similarly

to our financial reports our Sustainability Report

covers the 2016 financial year (from January 1 to

December 31 2016), and gives an account of ALTEO

Nyrt. and its subsidiaries’ operations. In the future

we will publish the Sustainability Report together

with the Financial Report.

In 2015 Sinergy Kft. joined ALTEO Group. Sinergy

Kft., committed to sustainability and with its exist-

ing and planned energy efficiency projects, was an

ideal strategic fit for ALTEO Group’s future plans.

Data included in this report for the years 2013 and

2014 contain only the data of ALTEO Group; data

from 2015 onwards also includes data of Sinergy Kft.

and its subsidiaries. Since the services and assets

of Sinergy Kft. are now integrated in ALTEO Group’s

portfolio, to ensure completeness, we have also

included some details related to Sinergy Kft.’s oper-

ations that took part or originated before the fusion.

Our report was compiled according to the fourth

generation (GRI G4) guidelines of the Global Re-

porting Initiative (GRI) the world’s most widespread

reporting standard1. The report fulfills the criteria set

for the “Core” application level. KPMG Tanácsadó Kft.

provided assistance in the preparation of the report

and Deloitte Auditing and Consulting Ltd. provid-

ed limited assurance on the data and information

presented.

The Report’s content was determined based

on the results of the materiality assessment

carried out in January 2016. In the course of

the materiality assessment, we defined they

key stakeholder groups of ALTEO Group. In

cooperation with these key stakeholder groups,

we have identified the topics and aspects,

which we wish to focus most upon.

We have defined the scope of material topics ac-

cording to the degree of control that ALTEO Group

has over each aspect. Therefore the report contains

the results and outputs of the topics where ALTEO

Group is considered the decision-maker or imple-

menter. The scope for most aspects is the opera-

tions of ALTEO Group, but in certain cases we also

include results which go beyond the organization,

for example the results of power plants operated

or overseen by ALTEO Group experts. In such cases

we indicate the results of facilities owned and oper-

ated by ALTEO Group separately.

We welcome your comments, recommendations,

questions or other remarks in connection with our

Sustainability Report or with the operation of ALTEO

Group at this e-mail address:

[email protected]

1 United Nations: World Population Prospects. (https://esa.un.org/unpd/wpp/Publications/Files/Key_Findings_WPP_2015.pdf).


10


ALTEO Group – Materiality Heat Map

Impact on company

3,0 3,4 3,8 4,2 4,6 5,0

Imp

ort

an

ce t

o s

take

ho

lde

rs

5,0

4,5

4,0

3,5

(Environmental effects of) Products and services

Water

Labor/Management Relations

System EfficiencyEmployment

Anti-corruption

Training and Education

(Social) Compliance

Demand-Side Management

Local Communities

Customer Privacy (IT security)

Occupational Health and Safety

Availability and Reliability

Emissions

Energy

Economic performance

Disaster / EmergencyPlanning and Response

Customer SatisfactionAsset Integrity

and Process SafetyEffluents and Waste

(Environmental) Compliance

(Product Responsibility) Compliance

Indirect economic impacts


11



12



IV. OPERATING ENVIRONMENT

15


In contrast with our previous historical periods

the 21st Century is the era of a range of structural

and global problems that can only be addressed

by structural and global responses. The impacts

of the activities of mankind has grown to a size

that makes local initiatives and local respon-

sibility insufficient. The interconnectedness of

global society and peoples has reached a level

where each slight movement can be felt on the

other side of the world. This is true for every part

of society, not just in cases of mutual international

economic dependence, global pandemics, disrup-

tions in food supply chains and famines, but also

regarding social inequalities as well as environ-

mental pollution and the degradation of ecological

systems.

The sustainability challenge is encoded in the

current socio-economic and ecological system,

because the expanding needs of the growing

population (consider the consumption of meat,

telecommunications, energy, etc.) have to be

provided for from the same limited amount of

resources as before. The population of our planet

is expected to grow at its current rate until 2050,

by which time we will be sharing the Earth with

10 billion other people. This growth will be distrib-

uted unequally: the share of African populations

will rise in global terms from 16% to 25%, while the

Asian population share is expected to fall to 54%

from the current 60%.2

By 2030, the number of people in the global ‘middle

class’ will reach 4.9 billion.3 Thus billions of people

will be joining a resource-intensive lifestyle.

The greatest challenge of the future, there-

fore, will be how to satisfy the needs and

consumption of the new middle class while

combating the ever-growing resource scar-

city and ensuing price volatility. Access to

water, energy, food and other resources will

be most affected by this challenge.4

As growing needs contribute to growing emis-

sions; Climate Change will pose an even greater

threat to our access of to resources.

OPERATING ENVIRONMENT

2 United Nations: World Population Prospects. (https://esa.un.org/unpd/wpp/Publications/Files/Key_Findings_WPP_2015.pdf).3 OECD Observer: An emerging middle class. (http://oecdobserver.org/news/fullstory.php/aid/3681/An_emerging_middle_class.html) 4 KPMG: Expect the Unexpected (https://home.kpmg.com/xx/en/home/insights/2012/03/sustainable-insight-expect-the-unexpected.html)


16


Easily available and affordable energy is the basis of modern society: we cannot

produce or consume without energy. Consequently, energy consumption has

nearly doubled over the past 50 years.5 Changing demands and technological

development have caused great changes in the composition of the energy

resources used: the reliance on coal and natural gas in total energy consump-

tion has increased the most.6 The cause for the boom in energy consumption is

economic growth, as experienced by the developing world, where millions of

consumers are emerging from deep poverty, increasing global energy demand.

The fastest ways to meet such skyrocketing demand was the use of coal and

natural gas-fueled power plants.

Climate Change, caused by increased greenhouse gas (GHG) emissions, is

still a growing risk for society, the economy and the natural environment.

The extreme weather conditions caused by Climate Change contribute

not only to a potential decline in food safety, but also carry the risk of

financial losses and can be the potential cause of the spread of global

epidemics as well as the destruction of local and regional ecosystems.

Growing awareness of Climate Change reached its climax in 2015, when the

leading decision-makers of the world signed the Paris Agreement. The Agree-

ment documents the shared objective of the signatories to work to decelerate

the rise of the global average temperature to below 2oC, and to decrease gre-

enhouse gas emissions.7

Global energy sector

5 International Energy Agency: World Energy Outlook 2012 (http://www.worldenergyoutlook.org/media/weowebsite/2012/PresentationtoPress.pdf) 6 International Energy Agency: International Energy Outlook 2016 (https://www.eia.gov/outlooks/ieo/world.php )7 European Environment Information and Observation Network, Hungary: Bonjour Párizs, Klímacsúcs 2015 (http://eionet.kormany.hu/bonjour-parizs-klimacsucs-2015)

World energy consumption by energy source

(Quadrant Btu)

1990 2000 2020 2030 20402012

History

Liquids

Nuclear

Coal

Natural gas

Renewables

Projections250

200

150

100

50

0


17


Energy Strategies

The Paris Agreement became the first global

energy target that was widely accepted in the

world, by nearly 200 countries.

Achieving the goals defined in the Agreement

requires the cooperation of the public, private and

civil sectors.Hence the stakeholders of the ener-

gy sector started to work at finding new solutions,

frameworks and paradigms to align their strategies

and operations to the Agreement. Complying with

the Agreement is especially important for members

of the energy sector, which, globally, is a state-regu-

lated industry that provides universal service, and is

responsible for one third of global greenhourse gas

(GHG) emissions.

For the last 20 years the European Union (EU) has

been at the forefront of global efforts to mitigate

Climate Change. Independently of the Paris Agree-

ment, the EU has launched a Climate- and Energy

package also aimed at curbing Climate Change. The

initiative sets the EU-wide objective of decreasing

GHG emissions by 80%. To meet the goal set, the EU

formulated emissions targets for 2020 and 2030.8

The EU’s 2030 Strategy determines four main

directions: a 40% cut in GHG emissions com-

pared to the base year of 1990; increasing

the share of renewable energy to 27% of total

energy consumption; harmonizing the energy

efficiency and security plans of all member

states; as well as reforming of the EU Emissions

Trading System (ETS).

In 2012, Hungary put together its National Energy

Strategy 2030 in order to focus on reaching its ener-

gy efficieny-related goals. The objectives contained

in the Strategy correspond to the EU’s basic goals,

which are sustainability, competitiveness and secu-

rity of supply.9

8 European Commission: 2030 Energy Strategy. (https://ec.europa.eu/energy/en/topics/energy-strategy-and-energy-union/2030-energy-strategy) 9 National Energy Strategy 2030 (http://2010-2014.kormany.hu/download/4/f8/70000/Nemzeti%20Energiastrat%C3%A9gia%202030%20teljes%20v%C3%A1ltozat.pdf)


18


19


Renewable Energy

The Paris Agreement and the EU’s and Hungary’s

Energy Strategies would not be feasible without the

use of renewable energy sources.

The biggest advantage of the use of renew-

able resources is that they generate energy

with little environmental burden, emit no

greenhouse gases, and are inexhaustible.

Furthermore renewable power plants can be used

in a decentralized way, adapting to local needs and

demands. Based on its characteristics, renewable

energy production offers solutions applicable to

local challenges both in the developing and devel-

oped world.

Renewable energy plays an important role in de-

veloping and diversifying local energy supply . By

building an adequate network and infrastructure,

power generated from renewable sources may also

significantly contribute to reducing dependence

on fossil fuels. Furthermore, investing in renewable

technologies creates jobs worldwide; in the Europe-

an Union more than 1.5 million jobs were related to

the renewable energy industry in 2016, and based

on the forecast of a research project for the Euro-

pean Commission, this number will be close to 3

million by 2020.10

The share of electricity generated from renew-

able resources increased from 18% to 23% be-

tween 2005 and 2015.11

Globally, this increase was chiefly caused by the

development of photovoltaic (solar) power plants

and wind power plants, with installed capacities

growing in the past 10 years accordingly. Meanwhile

the production costs of photovoltaic power plants

have dropped sharply, contributing to a significant

increase in their application both by industries and

households.12

In 2015, energy from renewable resources amount-

ed to 14.5% of energy consumption of Hungary.13

Next to developing the Paks Nuclear Power Plant,

the use of renewable sources for the generation of

electricity has the greatest potential to reduce Hun-

gary’s dependence on imported energy, because

the natural conditions and environment support the

use of renewables.

In 2004, the share of renewable energy in Hun-

gary amounted to only 4.4%,14 but this figure had

tripled by 2015. Based on this trend, Hungary has

the chance to meet its target of 14.65% by 2020 –

or even before that date.

11 Renewables Global Status Report (http://www.ren21.net/wp-content/uploads/2016/06/GSR_2016_Full_Report.pdf) 12 International Energy Agency: World Energy Investment 2016 (https://www.iea.org/Textbase/npsum/WEI2016SUM.pdf)13 Eurostat: Renewable energy int he EU (43/2017) (http://ec.europa.eu/eurostat/documents/2995521/7905983/8-14032017-BP-EN.pdf/af8b4671-fb2a-477b-b7cf-d9a28cb8beea) 14 Eurostat: Renewable energy statistics (http://ec.europa.eu/eurostat/statistics-explained/index.php/Renewable_energy_statistics)


V. ABOUT THE COMPANY

21


The ALTEO Group was established in March 2008,

with the purpose of producing electric power.

In the early years the Company grew by way of

acquisitions, acquiring the Győr and Sopron Power

Plants from E.ON Group and purchasing three wind

turbines from Raiffeisen Energy. ALTEO Group’s first

own project was the development of a small-scale

cogeneration plant for the AGRIA Park shopping

centre in Eger. Expanding its portfolio, ALTEO

Group gave preference to power generation

from renewable resources as well as to tech-

nologies ensuring efficient electricity and heat

generation. Apart from developing a stable and

sustainable portfolio in energy production, ALTEO

Group was also working on extending its corporate

financing possibilities. In September 2010 ALTEO

became a public limited shareholding com-

pany and the Budapest Stock Exchange (BÉT)

launched ALTEO Group shares in category “B”,

creating the possibility for stock fundraising.

In May 2015 ALTEO Group successfully finalised

the acquisition of Sinergy Kft., formerly owned by

the ELMŰ-ÉMÁSZ Group. This acquisition was one

of the biggest energy deals of the year, and it ena-

bled ALTEO Group to join the leading companies of

the Hungarian energy sector.

In autumn 2016, ALTEO Plc. successfully conclud-

ed its initial public offering (IPO). As a result, the

company managed to quadruple the number of its

free float shares and secure HUF 14 billion of fund-

ing for projects supporting its strategic objectives.

ABOUT THE COMPANY

Company history

Milestones of ALTEO Group

2008. márc. 19.ALTEO Group is founded

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Summer 2009Acquisition of Hidrogáz Kft.

December 31, 2009Acquisition of Power Plants in Győr and Sopron

January 1, 2009Launch of electricity

trading activity

September 2010Becoming a public limited company

May 2012Acquisition of 3 wind power plants

May 2013Acquisition of 1 wind power plant

Autumn 2016Initial Public Offering in Budapest Stock Exchange

Spring 2010Acquisition of the landfill gas power plants (Nyíregyháza and Debrecen)

February 2012Natural gas trading licence is obtained

May 2015Acquisition of Sinergy Kft.


22


ALTEO Group

ALTEO Group is one of the leading companies

of the Hungarian energy sector, offering com-

plex, Smart Energy Management services. Its

business activities cover power generation

based on renewable resources, as well as on

highly efficient, hydrocarbon-based technol-

ogy; energy wholesale and retail trading; and

services provided to industrial companies,

focusing on establishing, operating and main-

taining energy systems and power plants.

ALTEO Group owns or operates 23 power plant

units; the total portfolio’s electricity generating

capacity is 156 megawatts and also 880 mega-

watts of heat generating capacity. The portfolio

contains plants based on renewable resources:

ALTEO owns four wind power plants, operates two

hydroelectric power plants and several plants based

on gases from renewable sources and biogas.

ALTEO Group’s operational structure reflects its

diversified portfolio: all project companies, power

generating and trading companies are subsidiaries

of ALTEO Nyrt. ALTEO Group is made up of the par-

ent company and its subsidiaries.

Spreading power generation based on renewable

resources and highly efficient decentralised systems

more widespeard is one of theGroup’s main tasks. In

line with this ambition, ALTEO Group has built and is

continuously developing a plant portfolio that con-

sists of units of alternative and renewable energy

as well as complementary, high efficiency, natural

gas fired electricity and heat cogeneration systems

located close to heat consumers. Furthermore the

Group operates and owns several thermal plants,

which produce energy for industrial plants and

serve urban district heating systems.

ALTEO Group also supports the efficient energy

management of its customers in order to help

them minimize the environmental burden caused

by their operations, decrease their energy costs,

and to ensure the maximum use of the economical

renewable energy sources. The “smart energy

management” approach is the basis of all ALTEO

Group services provided to industrial plants. The

philosophy behind this solution has three pillars:

on the supply-side, it is characterised by a reli-

able energy supply, energy efficiency and the

integration of energy from renewable sources; on

the demand-side it is characterised by increasing

cost- and energy efficiency initiatives; and finally

ALTEO Group offers complete solutions that are

tailor-made and innovative.Security of supply

and reliability and availability of services stand out

as most important factors in meeting such expec-

tations. As this new approach spreads, Hungary’s

energy system will become more sustainable, while

the services and cooperation of partners will be

more customized and flexible.

COMPANY PROFILE

Name: ALTEO Group

Address: 1131 Budapest, Babér street 1-3.

Owners (December 31, 2016): 67,4% Wallis Asset Management Zrt.

and subsidiaries7,4% Board of Directors, Supervisory Board

and members of top management4,7% Own shares20,5% Free float

Registered capital (December 31, 2016): 195 million HUF

Sales revenue (December 31, 2016): 14 billion HUF

Number of employees ( December 31, 2016): 192 persons


23


ALTEO Group’s continuously expanding retail activities offer affordable electric-

ity toHungarian small- and medium-sized companies. In addition, ALTEO Group

has its own Virtual Power Plant (VPP) and balance group. In 2016 ALTEO Group

also launched its gas business, with the help of which the company is able to

meet all the energy purchase demands of its clients.

VIRTUAL POWER PLANT – In 2011 Sinergy Kft. set up its Virtual Power Plant (VPP) – a system that ensures central control and regulation of small-scale

power plants. In 2016 ALTEO’s VPP included six small-scale power plants owned by the company, and is able to integrate furtherunits. The total capacity

was 48 MWe in 2016. Further information about the Virtual Power Plant can be found in the Products and Services chapter.

Power plant portfolio of ALTEO Group in Hungary

Jánossomorja

Sopron GyőrÁcs

Pápakovácsi

Budapest

Gibárt

Kisújszállás

Tiszaújváros

FelsődobszaNyíregyháza

Eger

Ózd

Kazincbarcika

Törökszentmiklós

Nagykőrös

Debrecen

RENEWABLE ENERGY GENERATION

INDUSTRIAL AND COMMERCIAL SERVICES

GAS ENGINES AND HEATING POWER PLANTS

ALTEO Group has signifi-cant competencies, among others, in the utilization of renewable energy sources.

By providing professional services to industrial plants, ALTEO Group contributes to the energy efficiency of its customers.*

ALTEO Group operates highly efficient, hydrocar-bon-fuelled electricity generating systems.

WIND MILLSÁcsJánossomorjaPápakovácsiTörökszentmiklós

RENEWABLE GASDebrecen – landfill gasNagykőrös – biogasNyíregyháza – landfill gasKisújszállás – thermal

methane gas

HYDROELECTRIC POWER PLANTSFelsődobszaGibárt

BIOMASSTiszaújváros

BORSODCHEM: BC-Therm boilerBC-Power Plant

MOL PETROLKÉMIA: TVK Power PlantTISZA-WTP Water Treatment Plant

AUDI MOTOR HUNGÁRIA KFT: HEAT SUPPLY

HEINEKEN: HEAT SUPPLY

MOM PARK: ENERGY CENTER

AGRIA PARK: ENERGY CENTER

* See further information about our clients in theClients section of the Report.

HEATING POWER PLANTSKazincbarcikaTiszaújvárosÓzdZuglóGyőri Power PlantSoproni Power Plant


24


Company Structure

ALTEO Group is organized into project companies and subsidiaries in order to offer the most flexible responses to our continuously developing customer needs.

Activities are focused in three main areas with the aim of maximizing the organizational synergies and to execute ALTEO Group’s long-term strategy:

energy trading, energy production and VPP, and complex services. The figure below presents the key partners and subsidiaries of ALTEO Group and their

ownership relationships.

Energy Generation and Virtual Power PlantComplex Energy Services

Sinergy Kft. Sinergy Energia- kereskedő Kft.

Civis- Biogáz Kft.

Renewable resource based Market based

ALTEO-Depónia Kft.

Eneriagas Kft.

Soproni Erőmű Kft.

Győri Erőmű Kft.

ALTEO-Hidrogáz Kft.

Hidrogáz Kft.

ALTEO-Agria Kft.

Tisza-Therm Kft.

Kazinc-Therm Kft.

Ózdi Erőmű Kft.

Zugló-Therm Kft.

Tisza-BioTherm Kft.

VENTEO Kft. Sunteo Kft.

e-Wind Kft. Windeo Kft.

Balassagyarmati Biogáz Erőmű Kft.

Kazinc- BioEnergy Kft.

Exim-Invest Biogáz Kft.

ALTE-A Kft.

Tisza-WTP Kft.

BC-Therm Kft.

ALTEOEnergiakereskedő Zrt.

100%

100%

100%

100% 100%100%

100%

100%

100%

100%

100%

100%

100%

100%

49%

60%

1%

100%

100%

100%

100%

100%

100%

100%

100% 100%

100%100%

100%

Energy Trading

ALTEO Nyrt.

Tisza- BioEnergy Kft.

ALT SOLAR Kft.

ALT

EO

GR

OU

P

CO

MPA

NY

ST

RU

CT

UR

E


25


Strategy and values

The energy industry was, is and will be crucial

for mankind. Modern life could not have evolved

without reliable energy sources; energy has

become so ubiquitous, we do not always realize

when we are using it.

Our future is defined by energy: on the one hand,

the inventions of the future will be based on

reliable, easily attainable energy, and on the

other hand, greenhouse gases (GHG) generated

during energy production and Climate Change

cannot be overlooked. Electricity and heat

production come with disproportionate emis-

sions: globally, they only account for 10% of the

world’s GDP15, but they are responsible for ap-

proximately 25% of the world’s GHG emissions.16

These characteristics of the energy industry drive

innovations and investments aimed at achieving

sustainable and reliable energy supply for every-

day life and future inventions. Accordingly, global

energy policy is adapting to the circumstances,

focusing on efficient technologies and low- or zero

emission power plants. The future will be about

smart networks, tools, homes, high-tech services,

electric vehicles and even smart decentralized

energy supplies based on renewable resources.

ALTEO Group identified the opportunities alongside

this shift of focus and aims to be an active, leading

player in this energy revolution, shaping the solu-

tions of the future.

ALTEO Group’s strategic goal is to become an

energy supplier that offers an optimal combi-

nation of energy trading, decentralized energy

production and complex energy services to

its clients, while granting steady yields to its

investors and shareholders. The main aim of

this strategy is to ensure sustainable operations

while taking the economic, environmental and

social impacts into account.

In order to reach these goals, the company is de-

veloping an energy portfolio that includes power

generation based on renewable resources, as well

as on highly efficient, hydrocarbon-based technol-

ogy, while building a customer-focused and flex-

ible energy trading branch. Moreover, the ALTEO

Group assists with its partners’ energy manage-

ment in order to reduce the environmental impact

as well as the energy costs that stem from their

operations and to be able to utilize cost-efficient

renewable energy sources to the maximum.

15 Leonardo Energy: World Energy Expenditures (http://www.leonardo-energy.org/resources/798) 16 United States Environmental Protection Agency (EPA): Global Greenhousa Gas Emissions Data (https://www.epa.gov/ghgemissions/global-greenhouse-gas-emissions-data)


26


ALTEO Group’s strategy is based on three pil-

lars: reliable power supply, energy efficiency

and climate consciousness.

Reliable power supplying is key for the ALTEO

Group so that we can become a highly trusted

energy provider; energy efficiency ensures that

our services are carried out in a safe manner with

minimal environmental impact; climate conscious-

ness represents ALTEO Group’s responsibility

towards future generations that goes beyond re-

ducing negative environmental impacts. All pres-

ent and future developments and investments are

evaluated according to these three criteria.

The capital requirements of all investment op-

portunities between 2017 and 2019 identified

by ALTEO Group run at approximately

10-15 billion HUF.

These investments would be realized in the areas

of ALTEO Group’s current service lines.

Energy produced from renewable resources plays

an important part in ALTEO Group’s planned in-

vestments. On the company’s list of future invest-

ments, renewable resources account for ca. 50%.

The share of investments into power production

and VPP among all planned investments is above

35%, and the last 10% of our investments will be

aimed at the complex energy services offered to

clients.17

Currently ALTEO Group only operates in Hungary;

however, its goal is to extend activities to neigh-

bouring and other Central and Eastern European

countries.

ENERGY STRATEGY OF THE CLIENT

CLIMATE CONSCIOUSNESS

• Maximizing energy savings, optimizing the use

of existing asset stock

• Modern technology

• Renewable technologies for the reduction of

harm ful environmental effects

RELIABLE POWER SUPPLY

• High level of availability

• Reliable technologies

• Independence from energy supply problems

ENERGY EFFICIENCY

• Highly efficient energy generation, reduction

of CO2 emission

• Local electricity generation for minimizing grid

loss

„SMART ENERGY” CONCEPT OF ALTEO GROUP

17 It is important to note that ALTEO Group’s plans only reflect the opportuntiies identified. ALTEO Group does not guarantee that realized investments will maintain the levels reported, as plans may dynamically change over time. Investment plans included in this report only reflect the ALTEO Group’s intentions and strategy.


ENERGY STRATEGY OF THE CLIENT

CL

IMAT

E CO

NSCIOUSNESS

RELIABLE P

OW

ER

SU

PP

LY

ENERGY EFFICIENCY

27


Our values

Our values define the direction of ALTEO Group’s future development. These are:

Expertise and experience in a wide range of energy

services

Providing integrated, complex services

Customer focus, tailor-made solutions in line with clients’

needs

Flexibility, openness to new ideas and innovation

Commitment to protecting the environment

Transparent operations as a result of stock exchange

listing

Fair partnerships based on mutual benefits

Steady, reliable local offerings

Brand awareness and brand-recognition


28


Organizational operationOrganizational Structure

ALTEO GROUP’S ACTIVITIES ARE DIVIDED INTO TWO BUSINESS LINES:

ENERGY PRODUCTION AND COMPLEX ENERGY SERVICES,

and ENERGY TRADING.

These operations are supported by the financial, controlling, HR, marketing,

legal and compliance functions. This structure was established after the acqui-

sition of Sinergy Kft. in order to enhance the synergies between departments.

The organizational structure reported reflects its status on December 31, 2016.

ANDRÁSPAPP

Deputy CEO

ATTILACHIKÁN

CEO

ALTEO BOARD OF DIRECTORS

SÁNDORBODÓ

Chief Financial Officer

ANDRÁSKÓSA

ControllingDirector

DOMONKOS KOVÁCS

M&A and Capital Markets Director

ENERGYTRADING SUPPORTING

PROJECT DEVELOPMENT

László Molnár Division Director

WHOLESALE TRADE,PORTFOLIO MANAGEMENT

Péter Luczay Wholesale Energy Trading

and VPP Management Director

RETAIL TRADE

Gergely Kis Energy Trading Director

ENERGY PRODUCTION, OPERATION AND MAINTENANCE

Viktor Varga Division Director

TECHNICAL ASSISTANCE AND PROCUREMENT

Attila Lőrincz Technical Assistance and Procurement Manager

MAINTENANCE

Attila Góré Maintenance Manager

INTEGRATED MANAGEMENT SYSTEM

Beatrix Szabó Integrated Management System Manager

CFO

Sándor Bodó Chief Financial Officer

CONTROLLING

András Kósa Controlling Director

HR Zsuzsanna Sándor

HR Manager

COMPLIANCE dr. Zoltán Pataki

Legal Counsel

COMPLIANCE

Márta Osztroluczki Compliance Manager

MARKETING

Ágnes SimonMarketing Manager

DEVELOPMENT

Levente Tasnádi-Tulogdi Development Director

ENERGY PRODUCTION AND COMPLEX ENERGY

SERVICES

WIND TURBINES JÁNOSSOMORJA, PÁPAKOVÁCSI, ÁCS, TÖRÖKSZENT-MIKLÓS

BIOMASS TISZA BIOTERM

RENEWABLE GAS DEPÓNIA: NYÍREGYHÁZA, DEBRECEN TERMÁL METÁN: KISÚJSZÁLLÁSBIOGÁZ: NAGYKŐRÖS

HYDRO POWER PLANTS FELSŐDOBSZA, GIBÁRT

RENEWABLE ENERGY GENERATION INDUSTRIAL AND COMMERCIAL SERVICES

BC-THERMBC POWER PLANTTVK POWER PLANT

MOM PARKAGRIA PARK

TISZA-WTP WATER TREATRMENT PLANT

HEATING POWER PLANTS:

KAZINCBARCIKA,

TISZAÚJVÁROS, ÓZD,

ZUGLÓI ERŐMŰ

GYŐRI ERŐMŰ

SOPRONI ERŐMŰ

GAS ENGINES AND HEATING POWER PLANTS


29


Corporate Governance18

GENERAL ASSEMBLY

The company’s chief body is the General Assem-

bly, comprised of all shareholders. The General

Assembly is exclusively responsible for decisions

regarding leadership and operations, such as

changes in the company charter, transformation and

potential cessation of the company, election of the

members of the Board of Directors and the Super-

visory Board, and the approval of the company’s

annual reports. The Board of Directors convenes the

General Assembly at least once a year.

BOARD OF DIRECTORS

ALTEO Group’s main decision-making body is the

Board of Directors, which comprises of seven mem-

bers, who are legal representatives of the company.

The Board of Directors coordinates and manages

ALTEO Group, provides guidance and defines the

company’s business development concept. The

Board of Directors consists of at least three individu-

als, not executive bodies. The Chairman of the Board

is elected by its members. The members of the

Board of Directors are elected by the General As-

sembly to represent the company for up to five years.

In 2016, the mandate of all members of the Board of

Directors was valid until April 30, 2020.

The members were:

– Péter Kaderják, Chairman of the Board of Directors

– Attila Chikán Jr., Member of the Board of Directors

– Domonkos Kovács, Member of the Board of

Directors

– Zsolt Müllner, Member of the Board of Directors

– Gyula Mező, Member of the Board of Directors

– András Papp, Member of the Board of Directors

– Ferenc Karvalits, Member of the Board of Directors

SUPERVISORY BOARD

The work of the ALTEO Group is supervised by the

Supervisory Board (SB). In 2016, the mandates of

the SB were valid until April 30, 2020.

Members of the SB as of 2016 were:

– István Bakács, Chairman of the SB

– Dr. János Lukács, Member of the SB

– Dr. István Borbíró, Member of the SB

– Peter Jancsó, Member of the SB

AUDIT COMMITTEE

The Audit Committee consists of three members,

who are elected by the General Assembly from the

independent members of the Supervisory Board. In

2016 István Bakács, Dr. János Lukács and Dr. István

Borbíró were members of the Audit Committee.

The Audit Committee has the right to request in-

formation from members of the Board of Directors

or senior executives of the company to which the

addressees are required to reply in writing.

The Audit Committee assists the Supervisory

Board in overseeing the financial reporting sys-

tem, in the selection of the statutory auditor and

in cooperating with the statutory auditor.

18 Data related to corporate governance reflect its status on December 31, 2016.


30


EXECUTIVE BOARD

The Executive Board is responsible for the execu-

tive management of the company. The Board has

five members: the current CEO, the Deputy CEO,

the Chief Financial Officer, the Controlling Director

and the M&A and Capital Markets Director. The

Executive Board is responsible for ALTEO Group’s

operational leadership in accordance with the

company’s strategy, in compliance with current

legal requirements, cost-effective operation,

quality service delivery, healthy and safe working

conditions and environmental protection.

According to the requirements of the ALTEO Group’s

Integrated Management System (IMS), the man-

agement review, convened once a year by the

CEO, provides a platform for the Executive Board to

review the company’s compliance in line with the

above mentioned criteria, and, where further devel-

opment options are identified. During the review, the

management monitors the fulfilment of the sustain-

ability-related tasks of the Quality and Workplace

Health, Safety and Environmental Protection (HSE)

objectives, amongst others. If necessary, the Execu-

tive Board also defines new tasks.

AUDITOR

In accordance with accepted regulations, ALTEO

Group is required to have a statutory auditor. It is

the auditor’s duty to ensure that the audit is car-

ried out, to determine whether the company’s ac-

counts are in accordance with the Accounting Act

and whether they provides a true and fair view of

the financial position and operating results of the

company.


31


Integrated Management System

Underlining ALTEO Group’s activities related to

implementation, engineering services, investments,

energy production and operations as well as during

energy trading, the company commits itself to offer-

ing services that surpass customer expectations.

ALTEO Group pays special attention to ensur-

ing a healthy and safe working environment,

protecting its environment, developing ener-

gy efficiency in line with good precautionary

principles and that of responsible care. The

company is also committed to corporate

responsibility, in this way contributing to sus-

tainability.

Sinergy Kft. launched its integrated quality and

environmental system in 2003; in 2006, it introduced

a workplace health and safety management system,

creating the Integrated Management System (IMS).

After the merger, the IMS was extended to all sub-

sidiaries of ALTEO Group. In 2016, the IMS was cer-

tified in line with the ISO 9001, ISO 14001, ISO 50001

and OHSAS 18001 standards. During our reporting

period, all four systems have been audited and cer-

tified by an external party - SGS Hungária Kft.

The Integrated Management Policy summarises

the system, in which the company’s management

commits itself to providing quality services, a safe

working environment, energy efficiency, environ-

mental protection and sustainability.

In 2016, 26 internal audits were carried out, cov-

ering the entire IMS of ALTEO Group, including all

sites and organization units.

In line with the IMS, HSE inspections/HSE visits

were carried out at all sites. Various authorities

carried out 16 HSE-type inspections, which resulted

in four logged observations and one fine of HUF

54,000. Apart from these, there were no non-com-

pliance issues regarding ALTEO Group’s operations

that would have resulted in a significant fine or

non-monetary penalty.

ALTEO Group in turn rated approx. 150 partner

companies, of which 92% received “adequate”

rating, 8% were rated “fairly adequate” and one

company was rated “inadequate”.


32



33



34


ComplianceThe main tasks of Compliance are to ensure AL-

TEO Group’s proper compliance with corporate

law, internal rules and the Corporate Code of

Ethics, identifying any unethical or illegal ac-

tivities, excessive business or workplace safety

risks, irregularities, infringements, to identify

liabilities, to execute corrective actions and to

track the company’s business actions.

COMPLIANCE POLICY

ALTEO Group introduced its Compliance Policy

in January 2016 and established the Compliance

Committee. The Compliance Policy, just like the

Code of Ethics, is reviewed on an annual basis.

During the development of the company’s

regulatory policy, ALTEO Group’s aim was to

provide the basis for transparent operations,

to define the framework of its business, to

document its processes, to specify the co-

operation between departments, to clearly

define tasks and to determine responsibili-

ties associated with them.

All members of the Executive Board and all em-

ployees of ALTEO Group must comply with the

Compliance Policy. Within the framework of the

privacy and data protection rules, ALTEO Group’s

Compliance Manager has the right to access all

information and data and documents owned by

the company, data stored on company-owned

devices and computers. ALTEO Group records the

details of compliance reviews in a database where

the information is evaluated and reported to the

Compliance Committee and to the Supervisory

Board annually. The Annual Compliance Report

is available on ALTEO Group’s website and is also

distributed to staff members through an inter-

nal communication channel. All educational and

internal briefings are designed to prevent abuse of

power and develop compliance-related awareness.

ALTEO Group corrects any detected non-com-

pliances and regularly assesses and reviews the

results of such corrective actions.

COMPLIANCE RESPONSIBILITIES

In addition to the Compliance Policy, several

internal policies and regulations ensure the

responsible operation of the company, which

belongs among the responsibilities of the com-

pany’s managers.


35


The CFO of ALTEO Group is responsible for the

compliance of activities related to financial opera-

tions and taxation. The IMS Manager is responsible

for quality management, environmental protection,

work safety and energy efficiency. The company’s

IT head is responsible for IT security.

The Executive Board is responsible for creating

and maintaining a culture that supports ethical

operations. ALTEO Group expects them to show

exemplary ethical behavior, to monitor employ-

ees’ compliance with ethical principles, and

to provide support to staff who ask questions

regarding the Code of Ethics and to raise issues

in a constructive way.

It is very important that no staff member should

suffer any kind of discrimination in retaliation to

raising an issue or problem. Finally, managers are

expected to report ethical issues that go beyond

their level of responsibility to the Compliance

Manager immediately – issues that require ethical

investigation according to the ethical procedure.

Appropriate behavior and compliance with the

Code of Ethics and internal regulations are a key

aspect in evaluating the performance of ALTEO

Group’s executives and employees.

All of ALTEO Group’s staff members participate

in ethical training courses, IT courses, and they

must sign a written declaration about their compli-

ance with the Corporate Code of Ethics and agree

to comply with the IT Code. Furthermore, each

employee of ALTEO Group must fill out a Declara-

tion of Conflict of Interests, which is verified by the

Compliance department. In the case of uncovered

conflicts of interest the Compliance department ei-

ther initiates the termination or averting of conflicts

of interest or authorizes these after an approval by

the management.

ANTI CORRUPTION

ALTEO Group strives to take into account the inter-

ests of its many stakeholders, and consider them

when assessing the effect of the company’s op-

erations on its shareholders, employees, business

partners, suppliers, the environment and the wider

society. At ALTEO Group, corruption is considered

a serious ethical offense.

In 2016 no cases of potential corruption came to

ALTEO Group’s knowledge.

COMPLIANCE WITH PROVIDING PRODUCTS AND

SERVICES

ALTEO Group’s long-term business relationships

are based on honest, correct and fair behavior with

its partners.

ALTEO Group’s goal is to provide quality, se-

cure and innovative solutions to its custom-

ers, therefore it is sensitive to their needs

- making suggestions for product develop-

ment, services, technologies and business

processes as well as providing sufficient,

accurate and comprehensible information

about ALTEO Group’s products and services

in good time, and treating customer data

confidentially.

To this end, ALTEO Group regulates the activities

of its Energy Trading business line, as well as the

Project Development, and Energy Production, Op-

eration and Maintenance divisions, and it operates

an Integrated Management System and checks

compliance with all relevant laws. Job descriptions

of line managers define the tasks, documentation

and traceability to provide controls that help to

eliminate negative effects and prevent possible

violations of law.


36


DATA PROTECTION

ALTEO Group intends to comply with the provi-

sions of Act CXII. of 2011 on Freedom of Informa-

tion (Hereinafter referred to as “Info. Act.”). As data

controller, ALTEO Group’s primary task is to define

the method of data management and the scope of

handling personal data concerning natural and le-

gal persons as well as other companies; to ensure

the constitutional principles of data protection and

data security requirements; and to prevent unau-

thorized access to data and unauthorized disclo-

sure or use of it. ALTEO Group fulfilled this obliga-

tion by issuing its IT Policy in September 2016.

ALTEO Group’s goal is to protect its customers’

data and to prevent it from being forwarded to

unauthorized third parties.

Personal data may be collected and handled

solely for a specific purpose, in accordance with

the requirements of fairness and legality. Personal

data can only be handled to the extent and for the

duration necessary for a previously defined pur-

pose. Upon signing a contract with ALTEO Group,

its customers accept the Business Rules regarding

personal data. ALTEO Group takes responsibility in

handling customer data in accordance with the law.

ALTEO Group assumes responsibility for managing

personal data with maximum consideration of the

Data Management Policy set out in the Info. Act

and in the Data Handling Notice, and it will not

disclose such to an unauthorized third party. In ex-

ceptional cases, ALTEO Group makes the personal

data of its customer available to third parties on

the basis of a court decision or statutory provision.

ALTEO Group assumes responsibility for

ensuring data security, and therefore takes

appropriate measures that ensures the pro-

tection of data and prevents the destruction,

the unauthorized use or alteration of data

collected, stored or processed.

The data management activities of business areas

are reviewed case-by-case on a regular basis

annually. If non-conformities are identified, correc-

tive actions are planned and these are later fol-

lowed-up on. In 2016 the Compliance Department

did not identify any case related to data leakage

or loss, nor did it receive any related complaints.

In 2016 no cases or complaints involving data loss

were reported to our Compliance department.


37


We are honest, trustworthy and reliable. Honesty is the central principle of all our actions, it defines how we act and behave with each other and with all of our partners.

We are committed to our customers, teammates, communities, owners, suppliers and partners. We want our business to contribute to the development of society.

We want to be the best in everything we do. Our goal is to fulfill our duties to the satisfaction of our partners and ourselves.

Our goal is to run our business activity in a way that grows profitability year by year.

We strive to guide the company by sustainability-related aspects. This requires strategic thinking, commitment and a high level of operational culture.

We find joy in work and we are delighted to work in a high-performance team.

CODE OF ETHICS

At the beginning of 2016 ALTEO Group issued the

Corporate Code of Ethics, created an online whis-

tle-blowing platform and created the regulative

framework for an ethical investigation procedure.

The Ethics line is available by phone twice a week,

and anytime on ALTEO Group’s website.

The Code of Ethics is available to all interested

parties via ALTEO Group’s website, and was intro-

duced to ALTEO’s employees via a training course.

The course also provided opportunities for staff to

ask related questions.

The Code of Ethics was created with the aim of

creating a useful guide that helps and protects

ALTEO Group’s employees, and informs the com-

pany’s partners about the behavioural norms

represented and expected by the Group. In this

document, ALTEO Group summarized the fun-

damental ethical principles of ALTEO Group, the

nature of its behaviour and corporate culture, its

attitude towards advocacy and responsibility.

Regarding employees, the norms set out in the

Code of Ethics have higher requirements than the

related laws, because ALTEO Group believes that

even some non-violent, well-intentioned acts can

have adverse consequences for the company and

its employees.

In addition to fundamental ethical principles such

as protecting and respecting universal human

rights as well as honesty, trust, humanity, tolerance

and responsibility, ALTEO Group’s shared corporate

values provide a good foundation - such as hones-

ty, commitment, expertise, success, sustainability

and good atmosphere.

H O N E S T Y : C O M M I T M E N T: EXPERTISE AND THE PURSUIT OF EXCELLENCE:

RESULT-ORIENTATION:

SUSTAINAB IL IT Y: GOOD ATMOSPHERE:


38


Products and Services

Power Generation

ALTEO Group is a company focusing on energy investments, energy production and trading. ALTEO Group’s service portfolio mirrors this threefold division:

power generation, energy trading and energy services.

ALTEO Group generates electric and thermal

energy in its own heating power plants and by

operating industrial power plants. Only electricity

is generated from renewable sources, i.e. at our

hydroelectric and wind power plants. Generated

electricity is purchased either by industrial con-

sumers or commercial facilities (operated industrial

power plants and energy centres), or by energy

trading companies, or MAVIR Hungarian Independ-

ent Transmission Operator Co. Ltd., which purchas-

es power from thermal plants and other plants on

a system-level, and, in the case of renewable ener-

gy souerces, through the FIT (feed-in tariff) system.

Heat generated by plants owned or operated by

ALTEO Group are used in two different ways: power

is either used in the industrial production process

(in the case of operated power plants), or is sold

either to district heating service providers or to

Products and services of ALTEO Group

Electric energy

Plants owned by ALTEO GroupEnergy purchased by industrial consumersEnergy purchased by energy tradersMAVIR (renewable energy)

Operating industrial power plants

Operating industrial power plants

Plants owned by ALTEO GroupHeat purchased by industrial consumersHeat purchased by district heat providers

Power-generation

Heat-generation

Electric energy

Wholesale trade

Retail trade

Energy trading

Naturalgas

Natural gas purchased from other suppliers

Electricity purchased from other producers

Plants owned by ALTEO Group

OperationConducted under complex operating agreement frameworks

Engineering services

Implementation

Investment financing

MaintenanceConducted under complex operating agreement frameworksIn ad-hoc and specific casesEnergy

services


39


industrial partners (as is the case with 6 heating

power plants), or by shopping centers (MOM Park,

AGRIA). In 2016, the installed electricity capacity of

the power plants owned and operated by ALTEO

Group was 156 MW, and the installed heat capacity

was 880 MW. According to the requirements of the

Global Reporting Initiative (GRI) the total built-in

capacity is shown broken down by primary energy

source (see below).19

INSTALLED ELECTRIC CAPACITY

Based on our installed electricity capacity, we

can produce the most energy from natural gas

with highly efficient cogeneration technology

or with independent steam or hot water biolers.

During the acquisition of Sinergy in 2015, the in-

stalled capacity increased dramatically thanks to

the new power plants which were brought into the

portfolio of ALTEO Group. They were mainly high

efficiency, cogeneration power plants. In 2016, 83%

of installed electric capacity was made up of natural

gas and by wind (11%) for all power plants owned by

ALTEO Group. The remaining 6% was derived from

other resources, like water, biogas and landfill gas.20

In cases of power plants operated for our clients, all

electricity is produced by using natural gas. Besides

this we also keep stocks of fuel oil at the TVK Power

Plant, at the BC-Power Plant and at the BC-Therm

boiler, as well as at the Power Plants of Sopron and

Győr for emergency cases when there is natural gas

restriction.

Except for our power plants operating with re-

newable energy sources, all our power plants are

able to cogenerate energy (where heat and elec-

tricity are generated in the course of the same tech-

nological process). In 2016, 87% of installed electric-

ity capacity at power plants owned by ALTEO Group

was based on high efficiency cogeneration tech-

nology. The technology and its environmental and

climate change advantages are discussed in more

detail in the System efficiency sub-chapter. 13% of

our non-cogenerated technology was derived from

the installed electrical capacity of wind and water

power plants, from which we produce so-called

“clean” electricity.

2013 2014 2015 2016

POWER PLANTS OWNED BY ALTEO 34 34 69 71

NATURAL GAS 25 25 59 59

WIND 7,5 7,5 7,5 7,5

LANDFILL GAS/THERMAL ASSOCIATED GAS 1,3 1,3 1,3 1,3

WATER - - 1,4 1,4

BIOGAS - - - 2,0

POWER PLANTS NOT OWNED BY ALTEO - - 85 85

NATURAL GAS - - 85 85

Installed electrical capacity (MW) - Total

19 ALTEO Group acquired Sinergy Kft. in 2015. Since the power plants operated by Sinergy Kft. represent a significant part of the whole power plant portfolio of ALTEO Group, we have retrospectively included the data of Sinergy Kft. into the Group data. The data before 2015 does not show the performance of ALTEO Group at that time, but contains an artificial total created for the purposes of unification and simplification. The purpose of this totalling is to make the assessment of trends evolved during the years easier.

20 The quantity and distribution of the energy actually generated by ALTEO Group are presented in the Economic Results chapter.

Share of cogeneration capacitat power plants owned by ALTEO Group

(2016)

COMBINED HEAT AND POWER (CHP)

87%

NON-CHP

13%


40


In the future we wish to extend the installed capac-

ities according to the demands of our clients. We

are extending capacities in TVK Power Plan in the

framework of main contracting by installing a 75

tons/hour capacity steam-boiler. Further capacity

increases depend on the future projects of MOL.

Capacity increase is envisaged at the BC power

plant, too which depends on the scheduling of the

intensification of the plants of our client. Besides

this we wish to increase the capacities of our Wa-

ter Power Plant in Gibárt by 500-500 kW and also

significantly that of the landfill gas power plant at

Debrecen.

INSTALLED HEAT CAPACITY

Similarly to installed electric capacity, most of

our installed heat capacity is based on natural

gas technology. Besides this we are generating

heat using biomass, hydrogens and methane.

The biomass boiler was installed for experimental

purposes in order to gain experience about biomass

firing. More information about this can be found in

the Biomass sub-chapter. We do not utilize heat

generated by burning landfill gas; in cases of ther-

mal associated gas, we use the heat generated by

electricity production.

We have been burning hydrogen at the TVK Power

Plant since 2014, but in 2016 the power plant was al-

ready suitable for the combustion of methane. The

developments implemented at the TVK Power Plant

being on the premises of MPK improve the efficien-

cy of the whole industrial park so that we can use

any extra hydrogen and methane gas for energy

production. This and similar solutions are excellent

examples of ALTEO Group strategy, where we meet

all requirements of reliable power supply, energy

efficiency and climate consciousness.

In the future we intend to increase our capacities in

line with the heat requirements of our clients. We

would like to increase the heat generating capac-

ities of our thermal power plants at Sopron and at

Tiszaújváros. We are planning the increase of water

treatment capacity of Tisza-WTP in order to cov-

er the desalinated water needs of the MPK plant.

When planning the project we envisage greater

extension (by nearly 30%) than the future needs of

MOL Petrolkémia so that we will be able to supply

desalinated water continuously even in cases of

bigger than envisaged growth.

HEATING POWER PLANTS

In 2016 the portfolio of ALTEO Group included six

heating power plants: in Budapest, Kazincbarci-

ka, Ózd, Tiszaújváros, Győr and Sopron. The heat

generated by the power plants is forwarded to the

population by the local district heating service com-

panies. Besides this the Power Plant at Győr ensures

the thermal power supply of Audi Hungária Motor

Kft., while the Power Plant of Sopron supplies ther-

mal energy to the Heineken brewery in Sopron.21

WIND TURBINES

ALTEO Group has 4 wind turbines: in Ács (2 MW),

Jánossomorja (1,8 MW), Törökszentmiklós (1,5 MW)

and Pápakovácsi (with 2 MW installed capacity).

We have been selling the electricity generated by

the wind power plants via MAVIR Hungarian Inde-

pendent Transmission Operator Co. Ltd. within the

Installed heat capacity (MW)

2013 2014 2015 2016

POWER PLANTS OWNED BY ALTEO 220 220 397 371

Natural gas 220 220 322 296

Hydrogen - - 74 74

Biomass - - 0,5 0,5

POWER PLANTS NOT OWNED BY ALTEO - - 471 509

Natural gas - - 430 430

Hydrogen - - 41 41

Methane - - - 38

21 See more detailed information about our heating power plants at: www.alteo.hu


41


framework of the mandatory off-take (FIT) system.

According to our prognosis, our wind turbine sites

will produce the allowed quantity (different per wind

turbine) until 2017-2018, after this they will produce

for the free market.

SUBSIDY TO RENEWABLE POWER GENERATION

Without state subsidy, renewable energy sourc-

es are, in general, not competitive today against

the traditional energy carriers. Hungary also has

a number of incentives in place to ensure the

achievement of the objectives formulated in the

National Energy Strategy, e.g. the mandatory

feed-in tariff (FIT) offered for electricity generat-

ed by renewable energy sources. Subsidies can

be obtained for investments in the framework of

tendering for Environmental and Energy Op-

erational Program (EEOP) and National Energy

Saving Program (NESV) funds, plus domestic

and EU agricultural programs support activities

connected to biomass production.

HYDROELECTRIC POWER PLANTS

In 2016, ALTEO Group operated two water power

plants at Gibárt and Felsődobsza. Both of these

water power plants are more than 100 years old

- they are industrial monuments. Regarding their

technological fabric, both plants have diversion ca-

nal systems. The water power plants are owned by

the North Hungarian Electricity Service Co. (ÉMÁSZ);

the units affected by reconstruction in Felsődobsza

are already owned by ALTEO Group. Since May 2015,

ALTEO Group has been taking part in the operation

of the water power plants on a rental and operator

set-up based on the contracts concluded by Siner-

gy Kft. in 2004. And now Sinergy Kft. is a member of

ALTEO Group.

The installed capacity of the Gibárt Power Plant

is 0.5 MW, the capacity of the power plant is

Felsődobsza was increased to nearly double in 2013,

thus its total installed capacity is now 0.95 MW.

DEVELOPMENTS AT FELSŐDOBSZA

Due to the high degree of wear and tear of the

rotary machines of the Felsődobsza Power Plant

(which was declared a monument in 2009 and

was hundred years old in 2011) the owner, ÉMÁSZ,

and the operator, Sinergy, decided on a perfor-

mance enhancing reconstruction together with

the replacement of key turbine fittings. Within the

framework of the project, implemented for more

than HUF 900 million by Sinergy Kft. in 2012-2013,

modern turbines were installed thanks to which

the electricity generating capacity of the water

power plant has nearly doubled to 950 kW.

In the framework of the rehabilitation project, all

technological equipment was replaced and the

waterworks and the engine-room of the power

plant were rebuilt in compliance with the site’s

monument-status and environmental regulations.

Project No. KEOP-4.4.0/A/09-2010-0094 Sinergy

Kft. was awarded HUF 376 million non-refund-

able assistance, co-financed by the European

Regional Development Fund and by the Hungari-

an central budget.

GASES FROM RENEWABLE SOURCES

In the portfolio of ALTEO Group, three small-scale

power plants generate electricity from gas deriv-

ing from renewable sources: at Kisújszállás, Nyír-

egyháza and Debrecen.22 The climate and environ-

ment protection impacts of the energy generated by

power plants operating with landfill gas and alterna-

tive gas are very important from a sustainability point

of view, since these power plants neutralize methane.

Methane is a kind of greenhouse gas which has 21

times greater environmental effects than carbon

dioxide, thus the prevention of its emission into the air

greatly contributes to combating climate change.

BIOGAS

At the premises in Nagykőrös, energy is gener-

ated from biogas produced by waste treatment.

The materials used include animal manure, steri-

lized by-products, agricultural products and other

by-products, as well as expired foodstuff waste.

Biogas, and from it electric and thermal energy, is

generated by anaerobic fermentation. The end

product of this fermentation is an organic material

(biogas manure) which can be used for the supply

22 See more detailed information about our small-scale power plants built to manage renewable gas at: www.alteo.hu


42


of nutrients in the course of plant growing. ALTEO

Group has been operating the related plant since

1 January 2016.

BIOMASS

Our fluidized bed biomass boiler was put into

operation in Tiszaújváros in January 2013 and it

has been generating heat for the district heat

system of Tiszaújváros since then. Tisza Bioterm

Kft., the boiler operating project company, is 60%

owned by ALTEO Group and 40% by GDHS Kft.

The fluid bed technology used is the proprietary

development of GDHS, and one of its main advan-

tages against the traditional technologies is that it

is capable for burning different types of biomass

basic materials. The technology is based on mixed

firing methods and it is able to burn woody, her-

baceous and other agricultural waste. The boil-

er’s installed capacity is 500 kW thermal energy.

The operating of the boiler offers us an excellent

opportunity to learn about the technology and to

utilize its hidden potential. The project was grant-

ed a HUF 65 million non-refundable subsidy by

the National Environmental and Energy Center

Non-profit Co. acting on behalf of the National

Development Agency, which amounted to 50% of

the project’s budget.

Energy tradingALTEO Group started its electricity retail trad-

ing and responsible ‘balance circle’ activities

in 2009. The wholesale trading activities were

also extended with the acquisition of Sin-

ergy Kft. The primary aim of the Group is to

ensure the energy demand of the consumer

portfolio; the sales of aggregated capacities

of power plants owned and operated by the

company and of small-scale power plants

joined our Virtual Power Plants on the market

of secondary reserve system level services

organized by MAVIR; adding to sales of paral-

lel generated electricity to other electricity

traders and to the organized market.

RETAIL TRADE OF ELECTRICITY

Our electricity retail trading activities mainly serve

a portfolio consisting of office buildings, shopping

centers, industrial parks, as well as small-scale and

medium sized businesses. As free market electricity

energy traders, we do not deal with universal ser-

vices i.e. services direct to residential customers.

RETAIL TRADE OF NATURAL GAS

Natural gas trading activities have been carried out

by ALTEO Energiakereskedő Zrt. since 2016, after

we received the relevant license from the Hungar-

ian Energy Office in 2012. The addition of trading in

natural gas to the activity portfolio serves a double

aim. Besides meeting the demands of power plants,

the primary aim is the serving of retail trade and

consumer portfolios and thus the better utilization

of the synergic opportunities within the group.


43


WHOLESALE TRADE OF ELECTRICITY

In terms of the wholesale market of electricity,

ALTEO Group has long term and short term sales

contracts with international and domestic part-

ners based on framework agreements. ALTEO

Group has opportunities for sales and purchases

on the Hungarian and international electricity stock

exchanges too. The contact system, sales and

purchase channels of ALTEO Group have increased

continuously since 2008.

VIRTUAL POWER PLANT

In 2011 the mandatory off-take system of cogen-

erated heat and electricity generated on any

non-renewable basis terminated, and this formerly

made the sales of generated electricity at subsi-

dized prices possible. One year after this, the bal-

ance circle operated by MAVIR Zrt. and embracing

its circle of producers also ceased to exist, thus the

small-scale power plants continuing their activities

left the officially regulated environment and went

over to the organized electricity market. This new

environment made the revision of the operating

concept of small-scale power plants necessary

and also the establishment of new contractual

relations.

Therefore Sinergy Kft., operating as a member of

ALTEO Group since May 2015, decided to set up

a Virtual Power Plant in 2011. The Virtual Power

Plant integrates and puts under a single IT plat-

form the linked power generating systems, offer-

ing us the possibility to create a bigger “virtual”

power plant, with bigger potential in all areas.

This method of capacity aggregation increases the

market weight and flexibility of producers inte-

grated into the Virtual Power Plant, which allows

for the widening of the circle of products that can

be sold on the electricity market and ensures the

development of better trading conditions.

The IT system enabling the operation of the Virtual

Power Plant was set up in Hungary at the begin-

ning of 2012, and its extension with a module over-

seeing our key regulatory reserves also continued

in that year. The successful accreditation proving

the eligibility of the system was granted by MAVIR

in 2012. Since the beginning of 2013 the producers

working with the Virtual Power Plant have been

actively taking part in the secondary regulatory

reserve market of MAVIR.

The Virtual Power Plant of ALTEO Group com-

prises six small-scale power plants belonging

to the company group and it is able to integrate

other – practically of unlimited number and

capacity – producers. The gross capacity of the

Virtual Power Plant was 48 MW in 2016.

Continuous, on-line remote

monitoring of production units

Centralized start-stop option in the

Control Center of Virtual Power

Plant (CC)

Timetable planning and timetable

keeping module for the automatic

operating of the power plant units

according to a schedule defined up

to one year ahead

Group regulatory operational mode

in order to keep the Virtual Power

Plant schedule

Balancing of schedule of

production units within the group

IT module and communication

tools for offering system level

reserves for MAVIR

MAIN CHARACTERISTICS OF THE VIRTUAL POWER PLANT:


44


Energy servicesIn the field of energy services, ALTEO Group offers

management of new projects, technical inspection

and turn-key implementation, furthermore develop-

ment of existing energetic systems and operation

and maintenance of existing technologies.

OPERATIONAL ACTIVITY

There are industrial companies, local governments,

district heating service companies and building

operators among our partners, all using our servic-

es. Our energetic services comprise electricity,

hot water, steam, cooling energy, desalinated

water generation and services, but we also un-

dertake the completion of other works meeting

special energetic demands (e.g. compressed air

production/distribution, other industrial gas servic-

es, etc.).

Our operating activities include the planning,

organization, implementation, management and

control of these works. In addition to meeting in

full our contractual obligations, the main pur-

pose of our activities is to achieve, maintain and

improve the satisfaction of our customers. The

special customer demands are met taking into

account the principles of climate consciousness,

reliability, and energy efficiency. All these are

served by the system of procedures and instruc-

tions formulated in the Integrated Management

System and by the implementation of these reg-

ulations. All these are the basis of our high quality

provision.23

MAINTENANCE ACTIVITY

During the operation of technological systems

and equipment we provide complete mainte-

nance activities in order to ensure long term

reliable operation. We also carry out service works

in the framework of our operational activities, as

we also offer these services to our other business

partners.

We mainly perform the maintenance of any service

equipment using our own employees. The contin-

uous development of our activities and the knowl-

edge of our professionals make it possible for us

to use the skills of our own employees in an ever

larger circle, ensuring professional and cost-efficient

maintenance for our partners.

See further information about our Maintenance

activities in the Availability chapter.

ENGINEER SERVICES, CONSTRUCTION

AND INVESTMENT

The building up of a new energetic system as

a green field project, or the energetic develop-

ments rendered necessary by the changing of

consumer demands and legal regulations require

significant time and cost expenditure, not to speak

of the internal resources tied to the implementa-

tion of the project. ALTEO Group undertakes all

the responsibilities and costs of these activities,

and allows for its partners to invest their free

cash into business opportunities connecting to

their main activities thus offering bigger revenue

generation.

Using the best available technology, we pre-

pare the technical and economic concept of

such projects based on financial calculations

and models, then we conduct the implemen-

tation of the project according to the environ-

mental and labour-safety criteria and construc-

tion designs.

In the framework of our energy efficiency in-

creasing activities, we undertake the screening

of the operation of the existing energetic infra-

23 More information about our operational activities is available at our website www.alteo.hu


45


Value ChainAs no ‘man’ is an island, ALTEO Group is also a

member, or a part of a much bigger system. In

line with our strategies and values, we endeavour

to create partnerships with many actors across

the energetic sector, and with our suppliers and

clients. We look for solutions which are profitable

for all stakeholders and try to ensure sustainabili-

ty in the long run.

Based on the value chain approach, ALTEO

Group is present in the field of energy produc-

tion, energy trading and energy services.

Our strategy is aiming at balanced, diversified and

dynamic growth, built on greenfield power plant

developments and market acquisitions of profita-

ble power plant projects, focusing on renewable,

highly efficient or alternative decentralized energy

production.

structure, based on which we make proposals

for the more efficient operating of the systems

and equipment. If required, we tender for carrying

out modernizations and reconstructions and make

guarantees for achievable energy and cost savings.

If our offers re accepted, our subsidiary coordi-

nates the whole process of project financing and

implementation.

Our most important projects are covered in our

Indirect Economic Impacts chapter.

SUPPLIERS PRODUCTION SALES SERVICES

ALTEO Group’s Value Chain

1. 2. 3. 4.

• Energy suppliers(fuel, electricity)

• Component and raw material suppliers

• Maintenance and trouble-shooting sub-contractors

• Construction sub-contractors

• Service providers for legal, financial, technical advisory activities

• Wind power plants

• Renewable gas power plants

• Biogas power plant

• Biomass boiler

• Heating power plant

• Industrial power plant

• Sales of services

• Virtual Power Plant (VPP)

• Retail trade of electricity

• Wholesale trade of electricity

• Retail trade of natural gas

• Operation

• Maintenance

• Engineering services

• Construction

• Project financing


VI. SUSTAINABILITY PERFORMANCE

47


SUSTAINABILITY PERFORMANCE

Economic performance

One of the biggest challenges of the 21st Century is

the supply of competitive, environmentally friendly,

sustainable and reliable energy, whether for in-

dustrial processes or for households. The purpo-

se of ALTEO Group is to meet this challenge in a

sustainable way with innovative and client-focused

solutions, in cooperation with all partners.

After the acquisition of Sinergy Kft., ALTEO Group

became the leading Smart Energy solution pro-

vider in Hungary.

The company will continue its intensive

growth in the future, with investments into

new power plants and technologies, creat-

ing solutions in cooperation with its partners.

These solutions provide benefits not just for

ALTEO Group’s partners, but also for the sus-

tainable economy.

In 2016 the global economy was still tending

upwards as a result of a decrease in raw mate-

rial prices and low yield levels. The economic

performance of the EU Member States had also

increased, stimulated by the nearly 2% growth

of the biggest economies (United Kingdom and

Germany).

Similarly, Hungary’s GDP growth was nearly 2%,

however, it lost some of its recently won new

momentum. Nonetheless the rates of inflation and

unemployment also decreased. Investments in the

energy industry declined by 10% in 2016, compared

to 2015.24

24 Central Statistical Office: The CSO reports: Economy and Society, 2017/1 (http://www.ksh.hu/docs/hun/xftp/gyor/jel/jel21701.pdf)

In order to see ALTEO Group’s performance as a

whole, it is important to evaluate its results based

on a holistic approach, taking into account the

three pillars (economic, social and environmental)

of sustainability. In order to maintain and support

our strategy in the long-run, ALTEO Group had to

define its targets. To do so, it has to collect, assess

and develop data related to its activities. It is a

priority for ALTEO Group to report the data of its

performance and to make it publicly available.

This report divides sustainability performance into

three main groups: economic, environmental and

social.


48


ALTEO Group’s purpose in the long run is to create

value for its shareholders and to protect the as-

sets of its owners and the security of its creditors.

Therefore, authenticity and reputation are priorities

for the Group, and these can be achieved through

transparency and continuous data reporting.

ALTEO Group’s objective is also to ensure stable

revenue and profit growth through the acquisi-

tion and development of new projects. The Chief

Financial Officer, working in close cooperation with

the heads of the different divisions, is responsible for

the company’s financial performance. ALTEO Group

intends to implement stable growth in a sustainable

and responsible way, in line with its internal reg-

ulations (Financial Policy, Controlling Policy, Pro-

curement Policy, Compliance Policy and Corporate

Code of Ethics). Moreover, it lays great emphasis on

transparency and reliability: ALTEO Group meets

the strict transparency and reporting obligations of

the Budapest Stock Exchange and reports covering

its member companies are certified by third-party

auditors. Ethical and responsible operations re-

quire ethical and responsible decisions; to ensure

that, the majority of ALTEO Group’s Supervisory

Board are independent members.

ALTEO Group collects feedback from different

sources in order to check if it is on the right track.

The annual reports of the company and its subsid-

iaries are certified every year by an independent

auditing firm. At the end of the audit process the

auditor gives feedback to the top management of

the company with the conclusions of the audit and

recommendations on how to improve. Every year

the auditor summarizes the insights of the report

for the Audit Committee. ALTEO Group’s Integrated

Management System is audited by a third-party, an

accredited certification body, and this ensures the

possibility for continuous development.

ALTEO Group also collects feedback from its em-

ployees and managers on an annual basis, and also

offers possibilities for its customers and suppliers to

give feedback in person.

Every year, ALTEO Group defines the objectives

that contribute to the implementation of its

strategy. These objectives are approved by the

Executive Board and the Board of Directors. The

focus of ALTEO Group’s first strategic period is to

establish integrated and efficient operations, and

achieving growth in selected business lines and

activities. The acquisition of Sinergy Kft. aligned with

ALTEO Group’s strategy and made it possible to ex-

plore the synergies between the two companies. An

important result of the fusion is the optimization of

ALTEO Group’s costs, and improvement of its result.

Furthermore, the fusion brought about knowledge

sharing and the extension of the company’s service

portfolio.

Economic results

„For us economic sustainability me-

ans that we develop our business

ambitions and plans within the given

frameworks, based on available com-

petences. Furthermore, while we work

on realizing our objectives, our decisi-

ons take into account aspects of sus-

tainability. In consequence, we operate

our company by keeping our promises,

ensuring dynamic growth, and making

innovation possible.”

Sándor Bodó,

Chief Financial Officer


49


2016 was the first full financial year after the fusion

with Sinergy Kft. The data for 2015 also contain the

figures of Sinergy in consolidated form.

Data regarding ALTEO Group’s financial perfor-

mance shows that the business year of 2016 was

very favourable for the company.25 The consolidat-

ed revenue of ALTEO Group was HUF 13.9 billion.

ALTEO GROUP’S EXTENDED CONTRACTS

MOM PARK has recently extended its 15-year cooperation with ALTEO Group by three years, with the option of extending it for another three years. As a result,

ALTEO Group will provide electricity as well as heating and cooling energy for the shopping centre until 2019..

In 2016, AUDI HUNGARIA MOTOR KFT. renewed its contract with ALTEO Group for five more years. The new contract was drawn up according to the guidelines

defined by Smart Energy Management and in line with Audi’s special requirements. As agreed, ALTEO Group will meet technological heat demands in peak

periods and ensure reserve capacities.

MOL PETROLKÉMIAI ZRT. extended its contract with Tisza-WTP Water Treatment Plant (owned by ALTEO Group) focussing on capacity booking, operations

and maintenance until 2026.

Based on the agreement signed with SOPRON HOLDING KFT., THE SOPRON POWER PLANT will supply heating and hot water to Jereván housing estate until 2025.

Produced and distributed economic value (HUF th)

2013 2014 2015 2016

SALES REVENUE 6 208 350 5 893 926 12 021 530 14 136 171

ALLOCATED ECONOMIC VALUE 6 265 811 6 239 840 10 855 754 13 511 715

Operating cost 5 161 303 4 945 459 8 206 343 10 063 700

Cost of energy resources used for production26 2 341 257 1 697 787 2 402 749 3 206 159

Employee wages and benefits 520 782 533 213 1 640 354 2 315 818

Payments to providers of capital 461 139 637 756 725 888 661 823

Payments to government 122 587 123 412 283 169 470 374

RETAINED ECONOMIC VALUE -57 461 -345 914 1 165 776 624 456

25 In the enclosed table the data for ALTEO Group were aggregated according to GRI guidelines, which are identical with terms used in accounting. More detailed information about the GRI methodology at: https://g4.globalre-porting.org/specific-standard-disclosures/economic/economic-performance/Pages/G4-EC1.aspx.

26 The cost of souces for energy production are part of Operating costs.


50


In 2016, operational costs represented the majority

of ALTEO Group’s expenses (nearly 75%).27 Close to a

third of all operational costs were spent on the cost

of energy sources used for energy production: in

2013 this amounted to 45% of the operational costs,

in 2014 to 34%, in 2015 to 29%, while in 2016 to 32%.

Wages and benefits paid to employees amounted

to 17% of total costs, nearly HUF 2.3 billion. This is an

11% increase compared to 2015; the increase can be

explained by the fact that Sinergy Kft. joined ALTEO

Group in May 2015, so its employee-related ex-

penses were not counted for the whole year of 2015,

unlike in 2016. Payments to capital providers (the

GRI methodology includes dividends and financial

expenditures) made up 6.6% of all costs, which is

9% decline compared to the previous year. In 2016

ALTEO Group paid 66% more to the state budget

than in 2015, nearly HUF 470 million. This increase

is explained by Sinergy’s acquisition and the fact

that the share of companies with higher tax rates

was greater within the Group in 2016 than had been

the case in 2016. In 2016 ALTEO Group did not have

community expenses as defined by the GRI meth-

odology (ALTEO Group’s community relations are

introduced in the chapter titled Local communities.)

State subsidies were granted to ALTEO Group in the

form of tax reliefs in 2015 and in 2016.

In 2016 59.4% of ALTEO Group’s sales revenue came

from market-based power generation, 22.2% from

energy trading and 27.9% from energy services.

For the time being renewable energy production

amounted to only 7.3% of our revenues.28

ALTEO Group’s sales revenue structure well re-

flects the main business lines. However, the gross

provision shows ALTEO Group’s added value in

each business line; in 2016 41% of ALTEO Group’s

gross provision was produced by its mar-

ket-based power generation activity, 22% by its

energy services and 17% by its energy produc-

tion from renewable resources.

ALTEO Group’s market-based power generation

activities require profound technical knowledge

about the operation, maintenance and develop-

ment of power plants.

The value provided to its customers through

energy services evolved and was enhanced by

ALTEO Group’s professionals over several dec-

ades of work, knowledge-sharing, and training.

The outstanding profitability of power gener-

ation from renewable resources shows that

ALTEO Group is developing its renewable energy

production activity with the right focus, compe-

tence and profitable portfolio.

Direct Economic Value Distributed by ALTEO Group (2016)

Operating cost

Cost of energy resources used for production

Employee wages and benefits

Payments to providers of capital

Payments to government

51%

24%

17%

5%

3%

Tax reliefs (HUF million)

2015 2016

Sport subsidies 39,0 73,0

Educational subsidies 7,6 4,7

Share of Business Lines (2016)

Sales revenue Gross provision

Market-based power generation 59,4% 40,7%

Energy Trading 22,2% 3,5%

Energy Services 27,9% 22,0%

Energy from renewable resources

7,3% 17,4%

Other 5,2% 16,3%

27 Since 2016 was the first full financial year after the fusion with Sinergy Kft. we do not report the cost structure of the previous years, as they are not comparable with our latest data.28 The distribution of the different business lines contains consolidated effects, therefore it totals to 122%. The consolidation impact is 22%.


51


THE TWO MAIN RISKS OF CLIMATE CHANGE:

1. Global warming may influence the operation of power plants, as it may

decrease the water flow of rivers, and extreme weather conditions may

contribute to shorter or longer power outages. Overall, the effects may

reduce ALTEO Group’s revenues and increase costs.

2. A global tendency in warmer weather may lead to the reduction of

customers’ heat demand, further reducing ALTEO Group’s potential

revenues.

MAIN OPPORTUNITIES OF CLIMATE CHANGE:

1. Changing customer demands and increasing consciousness related to

Climate Change and environmental protection will probably increase

demand for green energy for industrial and household customers.

2. Companies, governments and consumers will be more energy effici-

ency-conscious in the future, which will increase the market for invest-

ments in energy efficiency. Act LVII. of 2015 on Energy efficiency, as well

as other market trends, strengthen the expectation for mass demand for

energy projects in the future.

It is important to know the risks ahead, and the opportunities brought by the future. In order to realize ALTEO Group’s objectives, it is important

to identify the risks and opportunities that Climate Change poses, as these can fundamentally influence patterns of energy consumption and

generation.

RISKS AND OPPORTUNITIES INFLUENCING OUR ECONOMIC PERFORMANCE


52


GENERATED ENERGY

Our annual report for 2016 presents the generated

energy quantities resource-by-resource in line with

GRI regulations. Data of the power plants owned by

ALTEO Group and of those operated by the compa-

ny are presented separately.

In total, 721 115 MWh electricity was generated

by our own and other operated power plants

of ALTEO Group in 2016. Of the total generated

energy, power plants not owned by ALTEO Group

produced 542,000 MWh in 2016 which is nearly

20% growth compared to 2015. One of the reasons

for the difference is the launching of the Butadiene

unit at the MOL Petrolkémia plant, which saw a 29%

increase in the electricity generation of the power

plant. The other reason is the energy generated by

the BC power plant, the levels of which were low-

er than hoped in the period due to a fire incident

in 2015. Thus there seems to be an increase in the

generated quantity in 2016, although this is only a

return to the expected level. The fire incident was

caused by a technical breakdown and not by an

operational failure.

The quantity of power generated by power plants

owned by ALTEO fell by 2% in 2016. The reason

for this was the changed market environment. Of

the power plants owned by ALTEO Group, those

producing green energy (wind, water, landfill gas

and biogas) contributed 24% of our total generated

electricity.29

Besides electricity, the power plants owned by

ALTEO Group and operated by the company also

generated usable heat in nearly the same quan-

tity in 2016 as in the previous year. In total, power

plants owned by ALTEO Group generated 2.9 million

GJ heat30, while the power plants operated by AL-

TEO generated 4.9 million GJ.

Production

29 We compiled our data of generated electricity on the basis of measurments, except for our two landfill gas plants, where the data were calculated on the basis of energy sold and estimated self-consumption.30 In our Report we cannot publish heat generating data of power plants built on renewable gases and owned by ALTEO Group, because we did not use them in the reporting period, thus they were not measured.

Electric energy generarated by power plants owned by ALTEO Group

(ths MWh)

Biogas

Water

Landfill gas / Themal associated gas

Wind

Natural gas

2013 2014 2015 2016

28

18

8

18

188

68

150

19812

138

185

Electric energy generated by power plands not owned by ALTEO Group

(ths MWh)

Natural gas

2015 2016

419

542


53


One of the reasons for the increase in heat gener-

ated by power plants operated in the framework of

industrial services is the increased steam demand

of BC. The other reason is the increased steam de-

mand of MOL Petrolkémia plants, which on the one

hand was satisfied by energy generated at natural

gas-based power plants, and by heat produced

from hydrogen and methane. Hydrogen and meth-

ane firing used for such production utilized gas

remainders from the processes of MOL Petrolkémia.

This is a good example of our cooperation with our

partners in sustainability solutions.

AVAILABILITY

The main pillar of our strategy is to provide

reliable energy to our clients in economic and

sustainable ways. Ensuring reliable and continu-

ous operation for our partners is one of the guid-

ing principles of our operation, since it basically

influences the quality of our services. According to

the GRI regulations, we also present the availability

in the breakdown of energy sources, separating

the power plants owned by ALTEO Group from the

ones operated by us.

ALTEO Group formulates the energy production,

operation and maintenance guidelines in the form

of rules and procedures included in the Integrated

Management System. These procedures and their

annexes regulate in detail the operational guide-

lines to be followed in order to achieve the highest

availability, and to ensure the handling of eventual

operational failures and to keep our maintenance

duties in focus.

PREVENTION

One of the primary aspects and basic business in-

terests of ALTEO Group is to avoid negative impacts,

thus this became the daily task and job duty of the

employees. In all premises of ALTEO Group, our

employees continuously monitor factors influ-

encing availability and safety, and they identify

targets by which the indicators can be further

improved.

The relevant processes and maintenance instruc-

tions are formulated in the procedures of the Inte-

grated Management System of the Company. The

actual developments and targets are also set and

evaluated in the framework of the Integrated Man-

agement System during the annual management

audits. The time requirement of these implement-

ed developments can be shorter (smaller-scale

maintenance), but also longer in the form of a more

serious refurbishment. These targets are often

based on legislative regulations, but in many cases

in favour of own internal developments or in order

to add to the possibly higher quality service of the

Thermal energy generated by power plants owned by ALTEO Group

(ths GJ)

Thermal energy generated by power plants not owned by ALTEO Group

(ths GJ)

2013 2014 2015 2016

462

44

380

3116

33

42 2

2897

188 Biomass

Landfill gas / Themal associated gas

Hydrogen

Natural gas

Methane

Hydrogen

Natural gas

2015 2016

41644790

6128

28


54


partners. The responsible persons prepare status

reports about the meeting of the targets concerning

the expiration of deadlines, or of partial deadlines.

The efficiency and implementation of develop-

ments, performance indicators and production data

are presented and evaluated during the annual

management audits.

MAINTENANCE

An annual maintenance plan is prepared for the

organization, implementation and control of main-

tenance activities in order to ensure reliability.

Maintenance works carried out on a rotational basis

are well and efficiently supplemented with condi-

tion-based maintenance works, where we monitor

the condition of the critical equipment and compo-

nents using diagnostic tools and methods, and in

the course of assessment we determine the condi-

tion of the equipment. Our main diagnostic activi-

ties are vibration measurement, thermal imaging,

laser alignment and destruction-free material

testing. Today, diagnostics-based maintenance is

the basis of our maintenance strategy.

Wherever necessary, we intervene in order to

prevent more serious and longer breakdowns. With

Reliability Centered Maintenance (RCM) and Risk

Based Inspection (RBI) methods we pay special

attention to ensuring the functioning of key equip-

ment and to the safety of people and technology.

In every field of service, we make efforts to carry

out the maintenance of the key technological

equipment or technological systems in coopera-

tion with our strategic partners involving our own

maintenance staff, hence increasing the availa-

bility and reliability of the equipment. In order to

cover the greatest possible part of the maintenance

activities from our own resources, we lay great em-

phasis on the continuous training of our employees.

We conclude contracts with the official service com-

panies of the manufacturers for the maintenance of

the main equipment, ensuring in this way reliable

component supply, high quality execution of the

necessary maintenance works and a high degree of

availability.

AVAILABILITY

In 2016 the availability of the electricity generat-

ing power plants was on the whole around 90%.

In 2016 there were in total 9,287 hours scheduled

shutdown time, nearly 50% higher than in 2015. The

difference is mainly due to the planned outage at BC

power plant. Non-planned shutdown time was 3,141

hours in 2016, which is nearly 40% less compared to

2015. The non-scheduled shutdown time was longer

in the case of the power plant of Gibárt, because

the sluice-gates were replaced in 2016, and also the

heating power plants had longer than planned stop-

pages due to unforeseeable events (e.g. puncture).

Average availability rate (electricity)

2015 2016

Average availability rate of all power plants 0,96 0,96

POWER PLANTS OWNED BY ALTEO

Natural gas

Heating power plants 0,88 0,90

Industrial and commercial services 1,00 1,00

Wind 0,99 0,98

Deposited gas 1,00 1,00

Water 0,99 0,83

Biogas 0,99 0,99

POWER PLANTS NOT OWNED BY ALTEO

Natural gas 0,96 1,00


55


ALTEO Group is a dominant actor in the Hungar-

ian economic sector, and within this the ener-

getic sector. Thanks to energy projects, ALTEO

Group strongly contributes to domestic economic

growth directly through the tax content of the

purchased assets and indirectly with the reduc-

tion of energy costs due to the improvement of

energy efficiency.31 The nearly HUF 470 million

tax paid by ALTEO Group contributed to the

development of the country. In cooperation

with our clients and partners, we continuously

search for ways of improving energy efficiency,

for the utilization of renewable energy sources

and for the development of sustainable solu-

tions. Below we present such common solutions

and projects.

31 We do not compile the cost- and energy savings and emissions reductions of our clients in this report, because such data is confidential.

2015 2016

Average availability rate of all power plants 0,98 0,99


Natural gas

Heating power plants 0,99 0,99

Industrial and commercial services 0,99 0,97

Biomass 1,00 1,00

POWER PLANTS NOT OWNED BY ALTEO

Natural gas 0,96 1,00

Average availability rate (heat energy)

Indirect economic effects


56


RENEWABLE ENERGY DEVELOPMENTS

ENERGY PLANTATION

Sinergy Kft., in cooperation with WWF Hungary,

launched its energy plantation project in Tiszakeszi

in 2013. The purpose of the project is to find the

type of plant or technology which make plant pro-

duction possible in the most sustainable way using

agricultural land less suitable for the production of

food-based plants. The result of plant production

for energy purposes can be used as biomass, which

is a renewable energy source. The collection of

‘energy’ plants, and the production, treatment and

transportation of fuels offer employment possi-

bilities for workers in agriculture, also outside the

agricultural season.

“There are a lot of arguments in favour of renewables: either globally, or regarding the European Union renewable energy is the most important means of reducing greenhouse gas emission, which helps to slow down and mitigate negative impacts of climate change; plus, according to the latest reports 9.8 people worked in this sector globally in 2016; besides fossil energy production the renewable energy potential is distributed more evenly on the planet and also in our country, thus it offers possibilities and added value for a much wider circle; finally, renewable energy significantly improves the situation of regions hit by air pollution, since renewable energy does not result air pollution.

Investments into the renewable energy sector are increasing rapidly and they are considered good business in countries today, where there is good legislative and subsidizing environment. At the same time the investment and building costs have reduced significantly, mainly in case of wind and solar energy. Today the investment and building costs of renewable energy are much lower in more and more countries than similar costs of the cheapest fossil energy.Renewable energy is sustainable, if the emission reduction achieved by its use is measurable and de-tectable; that is why both the EU and Hungary support this type of energy. In case of good legislative framework the mature renewable technologies are competitive, which means that return is an important factor. It is also important that it should offer added value to as many as possible stakeholders, should create and maintain jobs and should not destruct the condition of the relating natural resources.

I find this a lively, practical and very useful pilot project for many, since we follow the way of biomass from the generation through processing until utilization. It is very important to gain own, authentic and reliable experiences useable in many different fields. I have seen a number of poorly launched biomass projects, which worsened the chances of the sector, but we hope that our common pro-ject will improve them.”

Csaba Vaszkó, Climate Change and Energy Team Leader, WWF Hungary


57


Within this project, Sinergy was responsible for the

plantation of propagating materials, for harvesting

and purchases, while WWF Hungary was respon-

sible for professional management, know-how and

general consulting. The plantation involved identi-

fying cooperative farmers and the right land they

owned. During the experiment we converted sever-

al types of energy willows and poplars into energy.

HUNGARIAN INTERCHURCH AID WITH SOLAR

ENERGY

In 2014 we completed the energy development

of the office building of Hungarian Interchurch

Aid in Budafok. In the framework of this project we

developed a 29 kW capacity ground source heat

pump system and we commissioned a 14 kWp ca-

pacity solar panel system. The installed heat pump

system is the most efficient solution among all

current heat pump systems, because its efficiency

does not depend on the fluctuation of the outside

temperature. This is ensured by the heat ‘usage’ of

the ground, which provides constant heat transfer

and heat absorbing capacity for the heat pump in

winter and summer. The solar system generates

uninterrupted electricity for the building.

BMW DEALERSHIP WITH GREEN POWER

The new Wallis Motor Pest Kft. BMW dealership

meets not only the latest international architec-

tural and technical standards of BMW, but 100%

of the building’s power supply is ensured from

green energy, which was implemented with the

help of ALTEO Group. The electricity demand of

the dealership is partly covered by its own re-

sources (30%) with the help of a small power plant

installed by ALTEO Group, partly from electricity

derived from renewable sources.

The new HUF 3 billion dealership project sees pri-

ority given to the reduction of environmental harm,

and so preference is given to heat insulation levels

of the doors and windows and of the facades, as

well as to the collection of rainwater for lawn sprin-

kling purposes, and to the use of highly efficient

engineering equipment which ensure the minimiza-

tion of the energy consumption of the facility. The

operation of the premises with green electricity

organically fits into this sustainability approach.

The in-house energy production of the new car

dealership not only reduces the energy costs by 30

percent annually, but also saves the environment

from the emission of about 20,000 tons of green-

house gases.

ENERGY EFFICIENCY PROJECT

ENERGY EFFICIENCY DEVELOPMENT

IN BC-POWER PLANT

In 2012, Sinergy Kft. made a proposal for the im-

provement of the energy efficiency of BC Power

Plant (BC-Therm) with the pre-heating of the

feed water. The solution improves the heat recu-

peration ability of the system and the efficiency of

the steam valve of the degassing unit. Annually, the

energy efficiency investment ensures 14,400 MWh

more recovered energy, which is two-thirds more

than was the case before the project’s implemen-

tation. This also means that 3,200 tons of carbon

dioxide emission is avoided annually.


58


ENVIRONMENT POLLUTION REDUCING

PROJECTS

REDUCING AIR POLLUTANT EMISSIONS

The air pollutant emission limit values of large

firing equipment was first regulated in 1998 and

was last updated in 2013. Decree 110/2013 VM

specified new, more stringent NOx limiting values

which relate also to the MOL Petrolkémia (MPK)

power plant and BC-Therm boiler, thus there was

a need for emission reducing investment.

After analysing a number of different scenarios,

ALTEO Group proposed to its clients the instal-

lation of Flue Gas Recirculation (FGR) systems.

Following this the MPK power plant could operate

within the specified limit values. As for BC-Therm,

it became clear that the FGR system alone can-

not guarantee the meeting of NOx limiting values

in the top loading range of the boiler, thus we

proposed the application of a burning modelling

solution. Based on the modelling results, the boil-

er was able to operate within the emission limit

value with the rebuilding and optimization of the

burner without installing FGR.

ENERGY AUDIT OF HEINEKEN BREWERY IN

SOPRON

In the framework of the energy audit carried out

for the Heineken Sopron brewery, Sinergy Kft

was looking for development possibilities in the

field of energy utilization and distribution in 2015,

in order to ensure the long term and economic

operation of the brewery. During the energy

audit, the possibility was mentioned that part of

the large volume of water used in beer produc-

tion could be obtained by the brewery from Sin-

ergy water wells, hence replacing demand for

urban drinking water. This solution on the one

hand reduces the use of urban drinking water for

industrial/technological purposes, and on the

other the annual water consumption costs of the

brewery.

REGIONAL IMPACTS

ALTEO Group has projects and premises in three

regions of Hungary, in the North-Eastern Hungarian

region, in the Western Transdanubian region and

in Budapest. Our role is especially important in the

Northern Hungarian region. In these workplaces ap-

plying state-of-the-art technology, 100% of the man-

agers and employees were recruited from the local

manpower market and they are employed by us at

competitive wages. Of the municipalities hosting

our premises, we provide heating to about 60,000

district-heated homes using modern, economic

and environment saving technology.

We want to contribute to the development of

these regions by purchasing the major part of the

tools, materials and services used in the oper-

ation and maintenance of these premises from

local small and medium size businesses, ensur-

ing stability for ourselves and for our suppliers by

long term contracts.

Regional impacts

Settlement Kazincbarcika Ózd Sopron Tiszaújváros Zugló Total

No. of supplied inhabitants (persons)

28 680 17 162 240 10 696 36 900 93 678


59


Environmental Performance

Use of energy sources

With its operation and performance of duties,

ALTEO Group inevitably influences the natural and

developed environment. In our Integrated Policy

we have formulated that besides our basic busi-

ness interests we should pay good attention to

environment protection keeping in mind the princi-

ples of prudence, responsible thinking and preven-

tion, thus contributing to sustainable development.

Therefore, we observe the regulations of the law,

requirements formulated by the authorities, by the

owners and by our partners and also those speci-

fied by our internal regulations, and we expect the

same from our sub-contractors.

We intend to contribute to broad, efficient energy

management and to the reduction of greenhouse

gas emissions by minimizing the environmental

risks arising from technologies, preventing en-

vironment pollution, continuously improving our

environmental performance and by spreading

cogenerated heat and electricity generation and

renewable energy sources widely.

The premises use electricity during their operation.

The proportion of used and generated energy is

around 3%. Fluctuation of our power generation

also depends on the demand for heat.

In the framework of the Integrated Management

System, ALTEO Group operates an energy man-

agement system which meets the requirements

of standard MSZ EN ISO 50001. We run these

activities within frameworks regulated by internal

measures, in the framework of the so-called Energy

Management System (EMS). The efficient operation

of this field belongs to the responsibilities of the

head of Integrated Management System and of the

Energy working group.

The purpose of the Energy working group is the

rationalization of the energy utilization of the infra-

structure of the facility and of energy production

(energy rationalization of the technological and ser-

vice infrastructure of the facility), the improvement

of energy performance, and the carrying out of

other activities defined in the energy management

system, or their coordination within the organization.

ALTEO Group has an integrated policy, which, is

a document – approved by the top management

– that formulates the commitments of the Com-

pany Group regarding energy consciousness

and efficiency, as well as the most important

objectives.

Energy auditing defined by standard ISO 50001

is performed at least once a year, or in cases of

bigger changes in the infrastructural elements and

in the related processes. Energy auditing is carried

out by the Energy working group under the control

of the Energy Management leader. The evaluation

of the results is a recurring topic at the meetings

of the Energy working group. The energy perfor-

mance indicators and their assessment are includ-

ed in the monthly reports of the different premises,

and they are presented during the management

audit annually.


60


In 2016 we made several energy and cost saving

technical developments. We modernized the

lighting in our heating power plants using flood-

light LED light sources. We added modern and

more operationally safe lighting in the gas motor

areas. After the investment in the BC Power

plant, we used the up until then not used hot

water for the pre-heating of natural gas. We par-

tially renovated the building of Power Plant of

Győr, the doors and windows were replaced and

heat insulation was introduced within the office

building of the Power Plant of Sopron, resulting

in further energy saving in both cases.

We are planning further developments in 2017.

In 2016, 44% of waste water arriving at the Water

Treatment plant from MOL Petrolkémia units was

not utilized; we used to cool it with other industrial

water and discharge it into river Tisza. The purpose

of our investment due in 2017 is to better utilize 90%

of waste water arriving at Water Treatment plant.

To this end we will install a heat exchanger sys-

tem during the extension of the Tisza-WTP Water

Treatment Plant which, besides the maximum use

of waste water, will also ensure the technological/

effective use of the waste water.

SYSTEM EFFICIENCY

The main service segments of ALTEO Group are

energy production, energy services - and trading

with electricity and natural gas. ALTEO Group offers

customized services to its customers taking into

account the profitability, environmental and

operational safety aspects. Besides the centrally

determined prices of electricity deriving from

renewable sources and of district heat, all our

products are market based, and they all have to

prove themselves on a competitive market. The

basic condition of our being competitive is that

the selected technologies should always be the

most efficient available ones – this is why we

prefer cogenerated energy production technolo-

gy, and why we have renovated our water power

plant. The efficient operation of our main activity is

supported by our internal processes, management

systems, management guidelines, trading and risk

management.

The Integrated policy of the ALTEO Group reflects

the officially declared intention and values of the

Executive Board, which are in line with the basic

values, business policy and strategic objectives

of the Company. The targets of our policy include,

among other things, the paying of special attention

to the continuous improvement of energy efficien-

cy, to the economic use of environmental sources,

to the protection of the environment, and to the

conservation of natural values, while we are com-

mitted to social responsibility, thus contributing to

sustainability.

Besides this, the top management of the Compa-

ny and the middle level managers of the different

premises are responsible for the basic operation,

management, continuous development and im-

provement of efficiency. Developments improving

system efficiency appear in the annual quality,

HSE and EIR targets, while special tasks are for-

mulated in the bonus plans serving as a basis for

performance assessments of the different employ-

ees. Concerning the expiry of deadlines, or partial

deadlines, the responsible persons prepare status

reports about the achievement of targets. The effi-

ciency and realization of development, the perfor-

mance indicators and production data are present-

ed and assessed during the annual management

audits.

SYSTEM EFFICIENCY IN THE TRADING BUSINESS

The central issues of trading business units are the

reliability of equipment, pricing and risk manage-

ment, thus our activities should be optimized based

on these aspects. ALTEO Group carries out the

operating of the existing facilities and the manage-

ment tasks with its own staff.


61


SYSTEM EFFICIENCY IN ENERGY PRODUCTION

BUSINESS

In the energy production business, we sell elec-

tricity or heat generated by our own assets to

our contracted partners or via the Virtual Power

Plant. Regarding the sales of electricity, our key

customer is MAVIR, who purchase system level

services from us. This is a completely regulat-

ed market, where regulatory centers operate in

competition with each other. System efficiency is

of elemental importance here, since capacities

should be offered at a price which on the one hand

produces enough coverage for the producers, but

on the other is competitive compared to the other

regulatory centers. System efficiency and risk man-

agement have decisive roles in the operation of the

Virtual Power Plant. We can sell thermal energy at

a centrally determined price, so it is very important

that the energy should be generated at the defined

beneficial (economic) cost level.

Efficiency of the premises is a good indicator of the

efficiency of the different power plants. Efficiency

expresses the extent of utilization of the generated

energy. The higher the efficiency of a technology

or a power plant, the more the energy of the given

energy carrier is utilized.

We present the efficiency of power plants operating

with cogeneration technology in the Cogenerated

power generation chapter.

Efficiency of power plants owned by ALTEO Group (2016)

Pápakovácsiwind turbine

Törökszentmiklóswind turbine

Ácswind turbine

Jánossomorjawind turbine

Gibárthydroplant

Felsődobszahydroplant

Biomassboiler

Nagykőrösbiogas plant

Kisújszállásithermal

Nyíregyházalandfill gas

Debrecenlandfill gas

60% 60% 60% 60%

70%

92%

85%

42%46%

39%39%


62


SYSTEM EFFICIENCY IN INDUSTRIAL SERVICES

Operation and maintenance activities, invest-

ment management, engineering services and main

contracting all make up part of the energy services

business.

Our customers are large industrial companies, dis-

trict heat service providers having different prefer-

ence systems; industrial consumers give preference

to operational safety, while in cases of district heat

suppliers, profitability is everything. Therefore we

have to handle the priorities of our clients flexibly.

COGENERATION

The main characteristic of cogeneration is that it has

two “energetic products” useful heat and electricity,

and they are produced in the course of the same

technological process using the same primary en-

ergy carrier(s). Cogeneration power plants imple-

ment this so that the gas engines or gas turbines

drive the generator, which generates electricity. In

the case of gas engines the flue gas and the other

waste heat from the gas engine is used for heating

purposes through hot water based heat exchang-

ers. In cases of gas turbines the heat of flue gas (in

certain cases also with gas engines, too) is utilized

through heat recovery boilers suitable for heat

production.

Improvement of efficiency of fuel utilization is

locally economic, environmental and of national

economic interest. It is an environment protection

task also, because fuel that can be saved by co-

generation need not be generated at the expense

of the environment, and such fuel saving results

in the reduction of environment pollution through

the reduction of CO2 emissions. In cases of proper

technical design, cogeneration has significant eco-

nomic advantages, which encourages the reduction

of the prices of energy products. Compared to vari-

ous separate technology, nearly 40% of the required

primary energy can be saved during the production

of the same quantity of heat energy and electricity.

PlantsEfficiency of cogenerated

electric energy

Efficiency of cogenerated thermal

energy

Total efficiency of cogeneration

Efficiency of heat generation

by boilers

Győr 31,64 22,10 53,74 91,00

Sopron 41,19 32,51 73,70 91,70

Kazincbarcika 33,23 40,40 73,63 96,42

Tiszaújváros 32,17 43,25 75,42 97,17

Ózd 40,55 41,17 81,72 –

Zugló 42,67 39,81 82,48 –

BC-Therm – – – 97,00

MOM Park 34,00 40,70 74,70 92,00

Agria park 37,40 47,60 85,00 –


63


ENERGY SAVINGS ACHIEVED BY COGENERATIONThe statement is supported by the following calculation:By introducing 1 GJ of natural gas (appr. 29.4 m3) into a gas engine 0.4 GJ (m.1 kWh) of electric energy and 0.42 GJ of thermal energy can be obtained as useful products. To produce 0.4 GJ (m.1 kWh) of electric energy in a con-densing power plant of 35% efficiency 0.4/0.35 = 1,142 GJ of natural gas is required.To produce 0.42 GJ of thermal energy in a thermal plant with boilers of 92% of efficiency0.42/0.92 = 0.456 GJ of natural gas must be input.Therefore, we have used a total of 1.142+0.456=1.598 GJ of natural gas, in contrast to the 1 Gj introduced into the cogenerating facility.

Primary energy required for the production of identical amounts

of heat and electric energy

Separate Technologies Cogeneration

GJ

1,8

1,6

1,4

1,2

1

0,8

0,6

0,4

0,2

0

1,142 GJ

0,456 GJ

1 GJ

FUEL USE

We mainly use natural gas as fuel to the opera-

tion of equiment in the facilities of ALTEO Group.

In 2016 94% of the used energy sources was

natural gas, 2% was renewable, 2% hydrogen and

nearly 2% methane.

The power demand of power plants owned by

ALTEO Group was totally 4 million GJ in 2016, nearly

6% of which originated from renewable sources. The

power demand of power plants operated by ALTEO

Group was 7,9 million GJ. Thus the total energy re-

quirement was 11,9 million GJ in 2016, which is by 1,1

million GJ more than in 2015.32

The greatest part of the renewable energy demand

is provided by biogas (36%), wind (28%) and landfill

gas (23%); we have met 12% of our renewables from

water and 1% from biomass.

In terms of the total cogeneration efficiency of the

Power Plant of Győr there is reduced efficiency due

to the summer non-heating period, because of the

economic optimisation of the Virtual Power Plant.

Primary energy utilization of power plants operated by ALTEO Group (thousand GJ)

Distribution of renewable energy sources used by ALTEO Group

(2016)

6733

3884

2013 2014 2015 2016

670

151 140

234

161

523

7944

3759 Renewable

Non-renewable: owned by ALTEO

Non-renewable: not owned by ALTEO

Biogas

36%

Wind

28%

Landfill

23%

Water

12%

Biomass

1%

32 Our data are published based on measurements.


64


HYDROGEN BURNING

Sinergy Kft. introduced hydrogen burning – the first instance in Hungary – in 2011. The main by-product of technologies applied by BorsodChem Zrt. is hydrogen. The generated hydrogen is utilized as a marketable energy source instead of being burnt on site or wasted. Thus we not only reduce waste, but save significant amounts of natural gas fuel.

The mixed firing with hydrogen and natural gas has very strict technological requirements. Hydrogen can only be burnt with the minimal amount of natural gas, or the quantity of natural gas in the mix cannot exceed the pre-defined value per burners and hydrogen cannot be burnt with oil firing. The compliance with these requirements is monitored by control technological systems.

TOTAL ENERGY CONSUMPTION

During their operational activities the relevant

premises use electricity. In 2016 the power plants

operated by ALTEO Group (own properties and

plants operated in the framework of industrial

services) consumed 308 083 GJ energy in total,

which is a nearly 9.5% increase compared to 2015.

The growth was mostly due to the increase of

heating consumption.

ENERGY SALES

In 2016 ALTEO Group sold 377 085 MWh electrici-

ty in total and 106 114 GJ natural gas.

ALTEO Group started sales of natural gas only in

2016. The retail trade of electricity has continu-

Primary energy required for the production of identical amounts of heat and electric energy

Sale of electric energy by ALTEO Group (ths MWh)

158

216

2013 2014 2015 2016

85118

153

173

204

Wholesale trade

Retail trade

Self consumption (GJ) 2013 2014 2015 2016

POWER PLANTS OWNED BY ALTEO 9 735 8 146 235 734 256 038

Electricity consumption 9 735 8 146 56 564 58 143

Heating consumption - - 164 283 186 392

Steam consumption - - 14 887 11 503

POWER PLANTS NOT OWNED BY ALTEO - - 45 613 52 045

Electricity consumption - - 45 613 52 045


65


ously increased during the past four years, while

the wholesale trading activity launched in 2014

has also shown dynamic increases during the past

three years. In the field of electricity retail trading

activities of the Company, the range of customers

was increased in 2016, resulting in a nearly 10%

increase in the quantity of electricity sold. Trading

with electricity is now a greater priority activity

of the company. Besides supplying the end-cus-

tomers, we also offer valuable electricity selling

opportunities to the energy generating units of

ALTEO Group.

EmissionEmitted carbon dioxide is what is mainly re-

sponsible for the increase of the average

temperature on Earth. Carbon dioxide (similarly

to other gases) is a greenhouse gas, and if it

accumulates in the atmosphere it does not

allow the energy arriving as sunshine to be

released and this results in global temperature

increases. The Kyoto Protocol was the first in-

ternational treaty aiming at the reduction of

greenhouse gas emissions, in the framework

of which the setting up of an emission trad-

ing system was also decided as an economic

incentive. The main point of this system is that

the facilities in question receive a certain emis-

sion unit (quota) free of charge and in the year

following the current year they give an audited

report about their emissions. If the audited

emissions exceed the allocated threshold, the

difference would be procured from the carbon

dioxide trading market (quota purchase), or a

fine is paid. Any company having lower actual

emissions can sell their unused emission units

(quota sales). Hungary is a member of the EU

Emissions Trading System, EU ETS.

In 2016 the third phase of the EU ETS was in

force. Its purpose is by 2020 to cause a 21% re-

duction in the emission of the sectors participat-

ing in the system compared to 2005.33 The pur-

pose of the Paris Climate Convention adopted in

2015 and ratified by Hungary in 2016 is to keep

global warming below 2 oC. In order to achieve

this target, every country made voluntary com-

mitment for the reduction of emissions. Accord-

ing to the new plans, the fourth phase of EU

ETS covers the period of 2021-2030. In line

with the Energy Strategy of the EU 40% reduc-

tion of the greenhouse gases is envisaged for

2030. This new objective means nearly 2.2%

reduction against the present 1.74%.34

As a power generating and trading compa-

ny we can reduce our emissions in two ways,

while supplying enough energy to meet the

demands of our customers: with the improve-

33 European Commission: The EU Emissions Trading System (https://ec.europa.eu/clima/policies/ets_en) 34 European Commission: Revision for phase 4 (2020-2030) (https://ec.europa.eu/clima/policies/ets/revision_en)

Emission units allocated to ALTEO Group

Free allocation units

Units purchased at auctions

2015 2016

72 931

126 996

63 834

112 563


66


ment of energy efficiency and with generating

renewable energy. Thanks to our modern firing

equipment we have only marginal possibilities

for development in the field of energy efficien-

cy. Our strategic aim is to invest in energy pro-

duction based on renewable sources, and this

is what we will further develop in the future.

The companies which own ALTEO Group’s

power plants have more than 50 MW input fuel

capacity so they are taking part as independent

entities in the EU ETS. During the past trad-

ing period the district heat generating power

plants received significant CO2 quotas allocat-

ed free of charge. In 2016 only Zugló-Therm

Kft. which owns the Power Plant of Zugló was

forced to buy a quota. BC-Therm industrial pro-

duction unit does not receive free quota, thus it

had to purchase the total quantity of emissions

at auction. In 2016 the freely allocated quota

covered 36% of the total emission of power

plants operated by ALTEO Group, while the

total emitted quantity fell.

Our direct carbon dioxide emission level

(“scope 1” in GRI system) is the result of our use

of fuel for energy production process. In 2016

emissions of carbon dioxide generated by the

operation of the power plants owned by AL-

TEO Group was 205 000 tons,35 which was an

over 8% reduction compared to 2015, thanks to

the reduced production of the Power Plant of

Győr.36 In 2016 emissions of biogas and lanfdill

gas were 3 179 tons and emissions of company

cars was 176 tons. This jump in the data up to

2015 was due to the integration of Sinergy Kft.

The indirect carbon dioxide emissions of AL-

TEO Group (“scope 2” in GRI system) derives

from the use of purchased energy, thus we

present it in two categories: purchased electric-

ity, and purchased heating. Our indirect emis-

sions re only a fragment of the direct total, there

were only 10 thousand tons of carbon dioxide

emissions in 2016, that is 4.5% of total emissions

(total of scope 1 and scope 2). Only the Tisza-

WTP Water Treatment power plant requires

energy for steam. As an energy generating

company, the most important indicator for us

is the intensity of emissions, i.e. what volume

of total emission (scope 1 and 2) each energy

unit results in. In 2016, power plants owned

by ALTEO Group emitted on average 74 kg CO2

GHG gas for every GJ of energy produced, a

reduction compared to the 2015 value.

ALTEO Group does not report the carbon diox-

ide emission of its clients, since MOL Zrt. and

BorsodChem Zrt. will be publishing their own

reports for 2016.

CO2 emissions per unit of production (kg/GJ)

2015 2016

Power plants owned by ALTEO 74,58 73,89

35 The emissions of our power plants belonging to the EU ETS system is reported based on certified measurements; other emissions of our operation were estimated using conversion factors published by DEFRA, Great Britain (Department for Environment, Food and Rural Affairs).

36 The totalling does not contain the emissions of our biomass boiler, because it is not measured, nor the emission of the biogas plant, since the composition of primary energy used by the plant is changing and we do not have a reliable conversion factor for the numerical determination of potential emission. We hope to account for this in future reports.


67


Total direct CO2 emissions by power plants owned by ALTEO Group (ths ton)

84

98

118

122

29

38

3

4

5

5

2016

2015

2014

2013

Total indirect CO2 by power plants owned by ALTEO Group (ths ton)

Purchased electricity

Purchased steam

Industrial and commercial services

Thermal plants

Landfill- and biogas

Company cars

9

9

1

1

0,36

0,30

2016

2015

2014

2013


68


In the premises operated by ALTEO Group totally

42 point sources are operating. The flue gas of gas

engines contains nitrogen oxides, carbon monoxide

and non-methane hydrocarbons (NMCH), while flue

gas of hot water boilers, or steam boilers pollute the

environment with nitrogen oxides or carbon monox-

ide in case of natural gas firing. Every premises has

either a uniform license for the use of the environ-

ment, or a point-source operational permit, which

contains regulations relating to point sources,

measurements and compliance.

When designing the plants the basic aspect was

the use of the best available technology. In order

to reduce harmful emission catalytic converters

were built into the flue gas system of gas engines,

and so-called LOW-NOx burners were installed in

order to reduce of the concentration of the emitted

nitrogen oxides. In the boilers the burning process

takes place at high temperature, the flue gas has

low carbon monoxide content and the soot forma-

tion is minimal. There is no dust emission. In the gas

turbines of industrial power plants there are also

burning chambers with low emission. The average

daily emission of the point sources did not exceed

the technological emission limit value at none of

the locations during the whole operational period.

We continuously measure emission in TVK Power

Plant and BC-Power Plant with emission measuring

system. At the other locations compliance is based

on the accredited measuring of annual emission.

The completion of annual reports and accredited

measurements, as well as laision with the authorities

is the responsibility of HSE; operation of the contin-

uous emission measuring equipment and keeping

the daily limit values, as well as reporting of exceeds

is the duty of the Power Plant manager. The compli-

ance of the operational practices is checked during

HSE internal audits and authority inspections.

Emissions of air polluting materials, namely of CO,

NOx and NMCH emitted by power plants owned

by ALTEO Group reduced between 2015 and 2016.

Air Cleanness protection


69


The reduction of nitrogen oxide emissions can be

explained by the technical adjustment of the gas

engine in the associated gas based power plant in

Kisújszállás, which now works more efficiently and

with lower emissions.

In the case of power plants operated by ALTEO

Group the reduction of nitrogen oxide emissions is

the result of our keeping to the new limit values.

ADAPTATION TO NEW LIMIT VALUES

As of January 1, 2016 new and more stringent

NOx limiting values directly relate to our large

combustion equipment, thus TVK Power Plant,

BC Power Plant, and BC-Therm plant sites in

Sopron and Győr had to achieve about 30% NOx

reduction.

In Sopron and Győr the KVZ and DUKLA boilers

ceased operations. At these premises, smaller

reconstruction of the combustion equipment

was necessary in the TVK Power Plant and at

BC-Therm. In the case of BC-Therm, there was

a smaller intervention for the adjustment of the

burners with the modification of the proportion

of primary and secondary air-flow. At the TVK

Power Plant, flue gas recirculation was imple-

mented.

The increase of SOx emissions at power plants

owned by ALTEO Group was due to the emis-

sion of the biogas plant of Nagykőrös taken over

in 2016.

Air pollution of power plants owned by ALTEO Group (kg)

Air pollution of power plants not owned by ALTEO Group (kg)

CO

NOx

NMCH

2015 2016

358 485

30 552 26 558

275 431

213 793

314 240

CO

NOx

2015 2016

323 876

284 286

108 264135 537


70


Air pollution of power plants owned by ALTEO Group (kg)

Air pollution of power plants not owned by ALTEO Group (kg)

SOx

PM

2015 2016

3119

5580

1236

219

SOx

PM

15 –– 46

2015 2016

EMITTED OZONE DEPLETING SUBSTANCES

At the TVK Power Plant, in the Tisza-WTP Water

Treatment Plan and in BC Power Plant and also

at the MOM Park Energy Center we are operat-

ing HVAC equipment meeting the specifications

of the Government Decree 14/2015. (II. 10.) for

activities in relation to ozone-depleting sub-

stances and certain fluorinated greenhouse

gases. We run the legally mandatory main-

tenance and leakage inspection of the HVAC

equipment in place, and in the reporting period

there was no need for the filling up of the sys-

tems. Thus there was no emission documented

with the HLH monitoring system.


71


During their operation, our facilities use drinking

water, industrial water and, indirectly, surface

water in the form of pre-treated industrial water.

Our biggest consumer of water is Tisza-WTP Water

Treatment Plant which produces desalinated water

for MOL Petrolkémia. The Water Treatment Plant

produces desalinated water from settled water

from the river Tisza, and from condensed water

returning from the different areas of usage of MOL

Petrolkémia after passing through ultra-filter equip-

ment, reversed osmosis and mix bed ion exchange

process technology.

The membrane technology determines the tem-

perature of the inlet feed water at 20-40oC. The

heating of the raw water is run using the available

condensation water, and additionally the use of

heating steam is also necessary. In order to protect

the membranes, the condensed water is also treat-

ed. The treatment of condensed water aims at the

screening of disperse corrosion products and the

reduction of oil content. De-oiling is more efficient

at lower temperatures, therefore the total quantity

of condensed water is led through a heat exchanger

and is cooled down with raw water.

According to our self-control plans, we continu-

ously check the quality (conductivity, pH value,

temperature indicators) and quantity of the emitted

waste water. Every quarter we have the chemical

and bio-chemical oxygen demand, pH values, total

nitrogen, total phosphorous and all solute content

measured by an accredited laboratory. No limita-

tion excesses were registered during the operating

period of the water treatment plant.

During the operation of our facilities, water recycling

occurred only in the TVK Water Treatment Plant,

no other material was recycled. MOL Petrolkémia

returns part of the desalinated water received from

Water Treatment in the form of condensed water

which is then re-processed. This amounts to 9-12%

of our total water consumption.

Annual water consumption of water plants (million m3)

2015 2016

Felsődobsza 476 575

Gibárt 373 283

Surface water is used only by our water plants.

From 2015 to 2016 the water consumption of the

power plant of Gibárt fell due to the maintenance

of the sluice-gates (during the reconstruction, the

production also fell).

The power plants owned by ALTEO Group primari-

ly use drinking water, subsurface water and some

industrial water. In 2016 the subsurface water con-

sumption increased due to the filling up of a certain

water pipe used in the Audi factory, while drinking

water consumption increased due to the addition of

supplementary water in the thermal power plants of

Kazincbarcika and Tiszaújváros.

Power plants operated by ALTEO Group use

mains drinking water only to a small extent, but

they are significant industrial water users. Tisza-

WTP Water Treatment Plant is the most important

water consumer in the portfolio of ALTEO Group,

treating nearly 3.5 million m3 of industrial water

annually. Before the integration of Sinergy Kft., the

power plants of ALTEO Group did not use significant

volumes of water, 30,759 m3 in 2013 and 23,968 m3 in

2014. Thus detailed data is only presented for 2015

and 2016.

Water consumption


72


We use recirculated and recycled water at three

facilities: at the power plant of Sopron, at BC power

plant and at Tisza-WTP Water Treatment Plant. Of

these the biggest quantity, nearly 494 000 m3 of wa-

ter was recirculated in the Water Treatment Plant in

2016; the total volume of recirculated and recycled

water was 533 386 m3. Of the total water consump-

tion of power plants owned by ALTEO Group (with-

out water power plants) the proportion of recirculat-

ed and recycled water amounted to 12% in 2016.

Proportion of recycled and reused water

2015 2016

Proportion of recycled and reused water

11% 12%

Water consumption of power plants and water treatment plant owned by ALTEO Group (except hydroplant) (thousand m3)

4500

4000

3500

3000

2500

20002015 2016

4070

90

18

4069

131

29

Water consumption of power plants not owned by ALTEO Group (thousand m3)

4500

4000

3500

3000

2500

2000

1500

10002015 2016

2014

1

2122

1

Groundwater

Mains potable water

Industrial water

Groundwater

Mains potable water

Industrial water


73


SEWAGE WATER AND RAINWATER DRAINAGE

At the urban heating power stations waste water is

produced whenever we generate heat either dur-

ing the de-sludging of hot water boilers, or along-

side condensation from exhaust fumes of gas

engines, or during the operation of desalinating

equipment, or during sample taking and discharg-

ing of the different equipment. Waste water is col-

lected in cooling shafts. The waste water of maximum

40oC is discharged into the sewage system after

cooling and proper treatment. Water collected in the

cooling shafts is pumped into the urban rainwater

sewage system and onwards from there.

On the territory of BC and TVK Power plants the

communal and non-oil sewage waters are drained

through the sewage conduits of BorsodChem Zrt.

and MOL Petrolkémia, thus the power plants are

only indirect emitters. Rainwater and used waters,

where there is the risk of oil contamination, or waste

waters emitted by other equipment, is released

into the sewage system of the companies after

pre-treatment. Pre-treatment is ensured by two

sewage water treatment units per power plants. The

authorities have not specified special limit values for

sewage water emitted by the power plants, since

the final emitters are in both cases chemical indus-

trial companies.

GROUND WATERS

At MOL Petrolkémia and BorsodChem power plants

the heating oil is stored in 300m3 double-walled

tanks. Around the tanks there are three monitoring

wells in the case of the TVK Power Plant, one in the

case of BC Power plant and three in the area of the

biogas plant at Nagykőrös, to monitor the quality

parameters of ground water.

The purpose of maintaining the monitoring

well system is the monitoring of pollutions

appearing with the contact with ground water.

We have the quality parameters of the ground

water checked by an accredited laboratory as

frequently as defined by the law.

In the case of operational failures, ground water or

surface water pollution may occur. In 2016 there

was no ground water pollution.

For power plants with greater than 50 MW input ca-

pacity and where the law requires it, we have water

quality damage control plans, and these are contin-

uously revised according to the regulations.

Soil and water protection


74


In the course of the Company’s activity, haz-

ardous waste, industrial non-hazardous

wastes and solid settlement waste are gen-

erated, while during the maintenance work

demolition waste may be produced. Third

party sub-contractors perform the collection

and transportation and disposal of communal

waste based on contracts concluded by the

different plants.

Monitored quantities of hazardous waste is generat-

ed by our operation and maintenance activities. Of

the waste produced by this activity, the majority is

oil waste and liquid fuel waste (oily sludge, exhaust-

ed oil, oily water and emulsion). Significant amounts

of waste is also generated by the use of absorbents,

absorbing materials and filters.

According to the above, exhausted oil and negligi-

ble quantities of batteries can be found in the pri-

ority waste streams. PCB containing waste are not

generated, we do not use such materials. We pass

on our exhausted oil waste to companies who

ensure that this oil is not recycled but managed

properly. The other hazardous wastes are burnt

or deposited.

All of our premises have workplace collection

sites established according to the regulations re-

lating to hazardous wastes. Our waste records are

based on the transportation data of waste, therefore

data indicated for the different years also relate to

this. Differences between the annual data are partly

due to the differences in the dates of generation

and transportation, and partly due to the greater

waste quantities generated by bigger maintenance

works.

The increase of waste quantities in 2015 followed

the integration of Sinergy Kft.

We report the quantities of hazardous and non-haz-

ardous wastes in our official waste reports; the

disposal data is based on estimations of the experts

of ALTEO Group.

Waste managementWaste generated (kg)

2013 2014 2015 2016

NON-HAZARDOUS WASTE 14 327 10 833 229 742 358 857

Recycled - - - 680

Deposited in landfills 4 930 4 460 202 560 339 480

Burnt - - - -

Other 9 397 6 373 27 182 18 697

HAZARDOUS WASTES 2 004 2 845 88 378 78 338

Recycled - - 39 685 34 917

Burnt 111 446 16 215 892

Deposited in landfills - - - 3 014

Other 1 893 2 399 32 478 39 515


75


Many of the facilities of ALTEO Group have a uni-

form environment usage licence and point-source

operating permits, as well as other environmental

permits. Requirements and specifications relating

to environmental protection are regulated by pro-

cedures of the Integrated Management System.

Accordingly, compliance with the internal require-

ments and legal regulations are controlled by in-

ternal and external audits organized in the frame-

work of IMS, as well as in the course of authority

controls. In 2016 and in the preceding 3 years we

did not receive any significant environmental fine.

DISASTER MANAGEMENT

The basis of our fire control and disaster man-

agement activities is prevention, reliant on our

safety technology. Prevention can be ensured by

emergency management measures, by providing

fire extinguishers and by reporting various grades

of accident. Fire is regarded as a priority risk. The

majority of our premises are equipped with fire alarm

systems and automatic extinguishers. In the cabins of

the gas turbines, CO2 extinguishers are in operation.

Fire regulations state the fire control and emergency

rules of the facilities; besides this, damage control

plans and complex protection plans were prepared

for the two industrial power plants, and these plans

contain all the response rules and regulations to be

followed in emergency cases specified by HSE legal

requirements for fire cases. In order to be prepared

for emergency cases, the plans are integral to our

training programs and we organize regular emer-

gency practices. The fire control regulations of the

facilities are detailed in the full fire regulations and in

the fire alarm plans.

PROCESS SAFETY

The operation of our power plants may basically be

regarded as a dangerous business, since we have to

operate burning equipment working at high temper-

atures and high pressure hot water and steam, and

flue gas passes through our systems. In addition to

the legislative requirements and the prevention of

workplace accidents, serious expositions and fire

cases avoidance and management are of great

importance for ALTEO Group. The Energy Manage-

ment System (ISO 50001, EMS) or the Occupational

Health and Safety Assessment System (OHSAS

18001) compose part of our Integrated Management

System, which ensures the reduction to the mini-

mum of operational risks by supplementing the work

safety management system and the environmental

management system, and we coordinate all of these

at system level.

Environmental compliance

“We pay special attention to the en-vironment and safety technological performance of our premises. Besides the keeping of the relevant Hungarian and EU environmental regulations the continuously high level of environmen-tal work also means for us the keeping on the lowest possible level of the environmental impact of energy gene-rated by us. We operate our premises in this spirit.Regarding workplace safety we had outstanding performances also com-pared with the other Hungarian energy generating companies, since there was no serious workplace accident at our plants, so our employees can return to their families safely every day. We continue to pay special attention to our environmental and safety performan-ces, preserving the basic conditions of sustainable operation.”

Beatrix Szabó,Integrated Management System Manager


76


In 2016 we had no cases which caused lost days or

employee fatality, or of sub-contractors or third par-

ties; we also did not have any explosion cases. The

last fire was in the BC Power Plant in 2015, the cause

of which was a technical defect and not operational

failure.

As part of the Integrated Management System

we have introduced environmental impact

registers for the assessment of risks. We also

implement measures for risky processes.

Operational safety is maximised by preven-

tive maintenance and by our extRIM program,

supporting the IMS.

HEALTH AND SAFETY

ALTEO Group introduced the IMS based on four

standards in 2016 and this was attested by a

third party. Our purpose is the uniform handling

of HSE tasks, the reduction to the minimum of

risks generated by our technologies and opera-

tional activities, the cost efficient implementation

of the necessary measures and the meeting of

legislative regulations. Of outstanding impor-

tance remains the prevention of workplace acci-

dents, of increased incidents and of occupational

diseases, the avoidance of fire cases, the efficient

cooperation between the stakeholders of occu-

pational health and safety, assessment of per-

formance indicators serving for the continuous

measurement of our HSE performance and the

continuous improvement of our performances.

The basis of our labour safety activity is the

chemical and psycho-social risk assessment pre-

pared completely for every premises and revised

every year. Our basic safety aim is the prevention

of workplace accidents and the provision of pre-

ventive occupational medical services for which

purpose we state and launch annual targets and

programs. The annual targets are determined

based on risk assessments, the experiences

of site visits and on quasi-accidents37 and are

approved by the General Manager. We announce

every year a quasi-accident competition where

we reward the “most successful” applicant, and

also Zero Accidents is a managerial target and

relating to this the reporting of quasi-accidents.

Our results are monitored during HSE visits

and surveys. We have four site visits in all of

our premises every year, one made by the top

management, one local “self-review”, and one

with the involvement of broader HSE, and also an

internal audit performed by HSE / Internal Au-

dit department. The annual targets are met and

followed up in the framework of the Integrated

Management System. Regarding the checking of

introduced procedures and regulations, the HSE

visits, internal and third party audits and authority

controls provide opportunities and feedback. We

present the labour and safety technological per-

formance of the Company at the annual Manage-

ment audit.

Health and Safety

2015 2016

Incidents of occupational diseases - -

Men - -

Women - -

Number of semi accidents 25 40

Men 25 40

Women - -

Number of accidents 6 2

Men 6 2

Women - -

Number of subcontractor’s accidents 2 -

Men 2 -

Women - -

Number of lost days 2 -

Men 2 -

Women - -

Number of missed (absentee days) 501 586

Men 440 535

Women 61 51

37 Quasi-accidents (“almost accidents”) are events that did not result in injuries.


77


Every new entrant takes part in HSE training

courses according to the regulations of the

management. In the course of these courses

they become acquainted with the function-

ing of the management system, with the risk

factors and environmental impact, with the

behaviour rules, with the methods of report-

ing HSE cases, with the rules and tasks to be

followed in case of fire and emergency. During

the annual refresher courses we update the

relevant educational material supplemented

by the current internal and legislative changes.

The health and safety activities are treated together

with the Integrated Management System and be-

long under the control of the Head of the Integrated

Management System. In every plant site, the Man-

agers of the premises are responsible for ensuring

the conditions of healthy and safe work.

In the employment of the ALTEO Group most

blue-collar workers work in ways where the risks

of occupational incidents is high. The number of

medical incidents in 2016 was 116. Thanks to our

organized and disciplined labour safety regulations

and practices there were no occupational disease

cases at our plants in 2015 and 2016.

The number of workplace accidents fell to two

in 2016, but they did not result in lost days. Our

sub-contractor accidents were caused by the fire

incident in BC-Therm plant in 2015.

We are also publishing health and safety rates in

line with GRI guidelines with the aim to show how

health and safety-related data changed as a result

of the growing number of our employees.38

GRI rates

2015 2016

Injury Rate (IR) 0,013% 0,004%

Occupational Disease Rate (ODR) 0% 0%

Lost days Rate (LDR) 0,11% 0,07%

Absentee Rate (AR) 1,11% 1,20%

The Injury Rate and the Lost Days Rate decreased

to 2016, while the Absentee Rate increased, which is

due to the increased number of employees result-

ing from the fusion with Sinergy.

At ALTEO Group there is a Labour Safety Com-

mittee. The subjective and objective conditions of

their operation and the provided budget were laid

down in separate agreements concluded with each

organization.

The Labour Safety Committee oversees labour

safety activities, besides specifying relevant

tasks, rights and obligations are also included in

the procedures of the management system.

The Committee takes part in the preparation of such

decisions for the Company which have an impact

on the health and safety of the employees, includ-

ing investments, mechanization, modernization

and establishment of new jobs. Our labour safety

representatives has the role of exploring the causes

of workplace accidents and occupational diseases,

and may participate in commissioning procedure

changes and HSE site visits.

38 Injury Rate (IR) captures the frequency of injuries relative to the total hours worked by all employees. Occupational Disease Rate (ODR) captures the frequency of occupational diseases relative to te total hours worked by all employees. Lost Days Rate (LDR) compares the number of days lost as a result of workplace accidents to the total hours worked by all employees. Absentee Rate (AR) compares the number of days not worked by employees to the total number of days worked.


78


Due to the nature of our operations, ALTEO Group’s

network is wide. We have links with district heat

suppliers, owners of industrial plants, electricity

supply system operators, retail and wholesale

trading partners, equipment suppliers, mainte-

nance service providers and authorities among

our direct partners. Due to the great importance

of the services provided by us, our indirect

partners also include local governments and the

population. We seek to present our social perfor-

mance in terms of the most and largest affected

groups so that our readers can more easily find the

relevant information.

THE OWNER

SHAREHOLDERS

As a public joint stock company, our shareholders

are some of the most important stakeholders, since

we can realize our plans, achieve our objectives and

strategy thanks to their confidence. We have contin-

uous and active contact with all of our shareholders

by providing regular reports, and involving them in

the decision-making processes. Three of the seven

Board members of ALTEO Group are delegates of

Wallis Asset Management Zrt.

ALTEO Group started its activity as a subsidiary of

Wallis Asset Management Zrt. in 2008. The shares

of the company were introduced to the Buda-

pest Stock Exchange at the end of 2010, and the

trading of stocks started after September 2012,

but Wallis Group remained the majority own-

er holding nearly 79% of the shares. In autumn

2016, ALTEO Group raised capital through open

sales of shares, reducing Wallis Group’s owner-

ship ratio to 67%.

To the best of our knowledge, the government did

own ALTEO Group shares in 2016.

Social performance

“Among the companies belonging to Wallis Asset Management Zrt. ALTEO Nyrt. is showing the most dynamic changes, develop-

ment and growth.

The Company’s management and employees working here have good attitudes, professional knowledge and commitment that

enable them to react to challenges. We believe in the Company’s enduring profitability, exceeding the market averages. Further-

more, it is important for us that ALTEO can reduce the ecological footprint of the whole Company Group with its sustainable and

environmentally friendly energy services.”

Zsolt Müllner, CEO, Wallis Asset Management Zrt.


79


GOING PUBLIC

ALTEO Energiaszolgáltató Nyrt., ALTEO Group’s

parent company, raised capital by the public

issue of new shares between 26 September

and 17 October 2016, at which time both institu-

tional and private investors could subscribe to

the Company’s securities. During the capital in-

crease, ALTEO Group sold in total 299,992 new

company shares at a price of HUF 4,630 with

a total value of around HUF 1.4 billion. With

these shares present on the Budapest Stock

Exchange and with new share releases, the

company now has a significant, nearly 400,000

share equity stake which significantly improved

liquidity. Shares of the Company were later

re-assigned from the Technical category to

the Standard category in the Budapest Stock

Exchange.

Regarding our values and operation, transparency

is a priority. Therefore, we publish on our website

all relevant information concerning operations and

documents created to inform investors and owners.

By sharing the information in an open, voluntary and

free way we build confidence among stakeholders,

especially among our owners and investors.

The most important topics for our owners are ALTEO

Group’s profitability, financing and growth strategy,

and its competitiveness and market position.

INVESTORS

ALTEO Group could not have grown without its

deliberate and sustainable capital raising strategy.

Since 2011 we have also ensured the indispen-

sable funds to our operation and growth with

several rounds of public bond issue for individu-

als and institutions.

It is important for our owners and investors that

we create value in a responsible and sustainable

manner. Thus, it is important for us to create value

for our shareholders in the long run, to protect the

assets of the owners and the security of the credi-

tors. For all these reasons it is extremely important

for us to ensure our credibility and reputation.

CLIENTS

Our clients are as diverse and varied as the portfo-

lio of our products and services. In order to ensure

that our clients feel that they are the most impor-

tant for us we have to work with them flexibly and

efficiently.

Our positive operational experiences and the cus-

tomers’ need for reliable and consumer-focused

distributors on the energy market encourage us to

enlarge our clientele by way of competitive offers

customized to the place of consumption. Our main

activities here are direct sales to the consumers

to which we can ensure the advantages of com-

petitive energy sources and sound balancing of

the circle. We promote price setting adjusted to

the place and consumer habits following targeted

energy efficiency consulting. In addition, we ensure

the satisfaction of customer needs with flexible

contractual and settlement conditions.

Our customers’ basic service requirements are

included in service contracts and in cooperation

agreements. ALTEO Group places great emphasis

on the complete fulfilment of services and con-

tractual obligations.

The basis of keeping contact with our customers is

good daily communication, which has become an

everyday activity of our plant sites. Including on-

line transfer of operational data through the daily

reporting system, together with the close cooper-

ation between the relevant operational levels, our

communication with customers is also an impor-

“The long term cooperation of BC-Erőmű Kft. with its operator means predictable costs, high levels of availa-bility and environment-conscious energy production activity. With the technical support and implementation of our energy efficiency projects we create value together.”

Zoltán Rigerszki, Managing DirectorBC-Erőmű Kft.


80


tant way of us remaining aware of their demands

and expectations. Another important means of

communication is the customer visits system oper-

ated within the framework of customer satisfaction

surveys.

MAIN CLIENTS OF ALTEO GROUP:

• MOL Petrolkémia Zrt., member of MOL

Group

• Wing Zrt.

• AUDI Hungaria Zrt.

• National University of Public Service

• Madách Theatre

• Heineken Hungária Zrt.

• BorsodChem Zrt.

• MAVIR Zrt.

• Local Government of Budapest District II

ACCESS TO SERVICES

For ALTEO Group, access to services can only

be interpreted in a limited sense. The access

to our services and products is ensured by

the highest possible availability of our pro-

duction units, all of which is presented in

detail in the Economic Performance chapter.

TRADING PARTNERS

Considering the figures, we serve most of our cli-

ents within the framework of retail trading. The

number of our trading and institutional clients

dynamically increases year by year. In 2016 the

number of our trading partners grew by 26% and

that of our institutional partners nearly doubled. The

long term plan of ALTEO Group is to further increase

the circle of trading partners in the future. Currently

the ALTEO Group has various contracts with nation-

al and foreign partners.

Number of retail trade partners

2013 2014 2015 2016

Commercial 416 495 540 686

Institutional 15 9 156 323

TOTAL 431 504 696 1009

ENERGY PRODUCTION,

OPERATION AND MAINTENANCE

We typically work with only a few partners on a

long term cooperation basis in the course of our

energy production, operation and maintenance

activities.

Here we give the number of our clients in the

breakdown of connection points as required by GRI

specifications, but several connection points refer to

the same client. Our electricity purchasing trading

partners are mainly E.ON and Northern-Hungarian

Electricity Service Co. (ÉMÁSZ). The power gener-

ated by our landfill gas power plant is purchased by

MAVIR.

Number of clients (connection points)

ElectricityHeat

energy


Commercial 15 242

Industrial 34

Institutional 2

POWER PLANTS OPERATED BY ALTEO

Industrial 5 3

We mainly sell heat energy through institutional

partners in Győr and Sopron. The heat generated

by our thermal power plants is purchased by local

district heat supplier companies in Kazincbarcika,

Ózd, Tiszaújváros and Zugló. Until autumn 2016

our power plant in Sopron also generated heat for

residential customers, but we have now rescinded

our district heat supplying licence, thus heat is pur-

chased from us by Sopron Holding.

The industrial and trading partners purchasing elec-

tricity and heat energy from us are: BC, MOM Park,

MOL Petrolkémia and Agria Park.


81


CUSTOMER SATISFACTION SURVEY

The feedback from our customers and the collec-

tion of key information are vital to the continuous

quality improvement of our services. ALTEO Group

places extraordinary attention to learning about the

demands and opinions of its customers, thus the

satisfaction surveys give us the opportunity to serve

our clients at higher quality levels.

Parallel to the introduction of the Integrated Manage-

ment System, the monitoring of customers’ satisfac-

tion in documented form is carried out continuously.

We measure the satisfaction of our customers every

year with questionnaires and at personal meetings.

In 2016 we did not involve our retail trade business

customers, but we plan to implement this in 2017.

Based on the survey made in 2016, we can say

that our customers have good opinions about

our activities (in general we received 5 points

on a 6 points scale). We have achieved im-

provements in almost every measured field in

2016 (competence, maintenance, scheduling,

keeping of deadlines, contact keeping, help-

fulness of our colleagues, etc.). According to

the feedback of our customers we have to

improve our website, the newsletter and the

organization of technical days, and we plan

to realize these in 2017. We made immediate

efforts for the correction of the smaller, oper-

ative type problems mentioned in the survey.

SUPPLIERS, SUB-CONTRACTORS

Building and developing supplier relations is very

important to us. In every service field we make

efforts to cover the maintenance of key techno-

logical equipment and technological systems

with long term contracts. An established supplier

network contributes to the high level of energy

services and creates a predictable and stable envi-

ronment for our suppliers.

Our contact with our suppliers and with other

business partners is based on mutual confidence

and respect. We make efforts to work only with

suppliers who perform activities meeting the legal

and business ethical requirements. To this end we

have developed a business partner control system,

including an important pre-qualification proce-

dure. Our potential business partners and suppliers

complete pre-qualification questionnaires. When

signing a contract with us, our business partners

make a statement that they agree with the Code of

Ethics of ALTEO Group.

When establishing contractual relations with our

suppliers – also keeping cost efficiency in mind

– ALTEO Group pursues the involvement of local

entrepreneurs as much as possible (i.e. whose

premises are registered in the given region) and

this contributes to the engendering of economic

advantages for our regional operations.

Number of suppliers

Payments (million HUF)

2013 2014 2015 2016

Number of suppliers (total) 391 433 796 896

Number of suppliers (Hungarian) no data available no data available 780 868

Share of Hungarian suppliers no data available no data available 98% 97%

2013 2014 2015 2016

Payments (total) 7257 6636 24 125 26 216

Payments (Hungarian) no data available no data available 23 143 25 464

Share of Hungarian suppliers no data available no data available 96% 97%


82


Compared to previous years, we were in contact

with a great number of suppliers in 2016 due to the

installation of a boiler house in our plant operating

in the industrial area of MOL Petrolkémia. Nearly

97% of our suppliers are Hungarian companies and

businesses. During the past 4 years, the proportion

of Hungarian companies among the total number

of our suppliers was 97-98%.

In 2016 we paid more than HUF 26 billion for the

services of our suppliers. The major part of this

(97%) was paid for the services of Hungarian com-

panies and entrepreneurs.

We pre-qualify every new supplier and we

re-evaluate our existing suppliers every three

years. Over a certain value limit we submit our

suppliers to further compliance tests. In 2016

we created a new pre-qualification question-

naire.

Transparency and other requirements, like Gen-

eral Terms and Conditions (GTC) of maintenance,

supply and business activities, working conditions

of contractors (HSE regulations and sanctions) or

the Code of Ethics are contained in the mandatory

annexes of our supplier contracts. Their compli-

ance with requirements contained in mandatory

Annexes are checked regulary, we made one such

audit per year up until 2016. From 2017 we plan to

attach supplier assessment to every completion

certificate.

The performance of our suppliers is examined and

evaluated during management reviews. As a result

of such reviews made in 2016 we found complaints

in the cases of twelve suppliers, which were inves-

tigated. Up until the end of 2016, six such cases

were closed satisfactorily, the rest will be closed in

2017.

With the close supervision of our main suppliers’

work (e.g. maintenance companies of main equip-

ment) and in providing professional support as

much as possible, we promote the good perfor-

mance of our sub-contractors. This is extremely

important from the point of view of the operation

reliability, work safety of our contracted partners

and sub-contractors during the implementation

and building of our projects, operations and main-

tenance.

In order to ensure the safety of our sub-contrac-

tors, we operate a very strict work permit sys-

tem. In our permises, works can only be carried out

by personnel with a work permit. Prior to issuance

of work permits, we ensure equipment safety too.

In order to ensure the safe work conditions of for-

eign sub-contractors, the work permits and safety

documents are also available in English.

EMPLOYEES

ALTEO Group’s organizational structure has been

continuously developing, always with a clear focus

on environmental impacts, the many business

landscape changes and the demands of our cus-

tomers. After the acquisition of Sinergy Kft. one

of the greatest challenges for us was the de-

velopment of a new and efficient organizational

structure, unification of central functions and

establishment of shared company culture. All

this had to be done by finding economic solu-

tions while preserving values.

“In the course of the fusion and after that we faced a lot of HR challenges. We had to make efforts for the res-toration of the feeling of secutiry. Our important task was the keeping of the employees and the workplaces, the strengthening of the integrated organi-zational units, and the development of the new organizational structure. Of the different HR systems of the two compa-nies we had to create new systems (e.g. performance assessment system) best suited to the common operation.During the two years we spent together two different company cultures were and are mixed, and merged day by day, the change and development of our shared culture is continuous.”

Zsuzsanna Sándor, HR manager


83


Our objective is that the management of AL-

TEO Group can continue to build the future of

the Company Group hand in hand with com-

mitted and motivated employees. The basis of

the loyalty and motivation of our employees

is that we are providing them with a stable

workplace, complex and motivating tasks and

competitive salaries. In order to ensure com-

petitiveness we also provide a ‘cafeteria’ plan

and we subsidise travel to work.

As responsible employers, we assist our workers in

case they get into difficult situations, thus we pay

higher wages than required by the law for sick leave

(85% instead of 70%), we take out group personal

insurance on our employees, and if necessary, we

pay funeral aid. Besides this, we help the safe and

efficient financial pre-saving of our employees for

the years of retirement by way of employer’s volun-

tary pension fund contributions.

The Performance Assessment Bonus System

(PBS) is our method of assessment of individ-

ual performances in the framework of which

we determine personal tasks and competency

development targets for the current year and we

evaluate them early in the following year.

The Central HR Department operating at ALTEO

Nyrt. manages the human resources of ALTEO

Group, dealing with matters connected to the em-

ployment of colleagues. The HR rules regulate the

accounting of benefits, training and selection, while

the PBS rules define performance assessment. Our

payroll accounting is outsourced. Our management

determines all responsibilities and duties within the

organization in the job descriptions, as well as the

requirements relating to education, qualification

and practice.

In line with with the economic growth of ALTEO

Group and with the development of business are-

as, the number of employees has also increased

continuously during the past years. In the course of

recruitment we make efforts to find the best match

between the future employee and the posted posi-

tion, trying to reduce unwanted staff turnover.

Besides the professional managers, HR col-

leagues also take part in the selection process.

ALTEO Group supports the promotion and change

of position of our employees, therefore we first

post new positions internally and then these

are posted externally later. In 2016 we set up 15

totally new positions for employees. It is a typical

practice, that even if an internal colleague does not

apply for the position, we regularly receive recom-

mendations and we are contacted by applicants

from within our colleagues’ circles of acquaintances.

In the course of 2016 we changed our five em-

ployer model into a two employer one; thus we

could reduce administration in several fields (e.g.

HR and HSE) and we unified the processes and

the regulations. Until 2016 collective agreement

was in force at two of our employers (Power Plants

of Győr and Sopron); this was terminated as part of

the reorganization, thus we do not have employ-

ees belonging to the scope of the older collective

agreement.39

In 2016, 87% of our employees were men and 13%

were women.40 This is mainly due to the nature of

the power plant operations, since the majority of our

workers perform physical work.

Total No. of employees

2015 2016

159

20

167

25

39 ALTEO Group started the operation of the biogas power plant in Nagykőrös in 2015, but the Company has been excercising the employer’ right only since the beginning of 2017, thus employee data does not cover this power plant.

40 Due to the ALTEO-Sinergy fusion we publish data about the total number of employees only for 2015 and 2016. If we add the number of employees of ALTEO and Sinergy Kft. in 2013 and in 2014 we get a similar number of total employees. From the point of view of the report, this, however is not representative, since at that time both were separate companies.

Men

Women


84


The facilities operated by the Company are run by

our own employees, and the thermal power plant

of Ózd is operated based on a contract overseen

by the employees of the local district heating com-

pany and under our remote control. Almost all of

our employees have contracts of indefinite dura-

tion; in 2016 five persons had fixed term contracts

for a project. In 2016 we had in total five part-time

employees, all of them women, two of them had

just returned from maternity leave.

During the past years, the number of employ-

ees leaving and joining stayed nearly the same

YoY, thus the total employee number has not

changed significantly this year. In 2015, the

fluctuation at ALTEO Group was about 5%, this

increased to 10% in 2016.

In 2016, in parallel with the development and

automation of one of our power plants, we termi-

nated the employment of six colleagues by mutual

agreement. We ensured outplacement programs

for them in order to help them to find work. In the

framework of the program they prepared for their

job seeking with the help of a consultant (writing a

curriculum vitae, attending job interviews). All par-

ticipants of the program succeeded in finding a job.

In the course of its activities, ALTEO Group

makes efforts to widen the cooperation with its

employees as much as possible, assisting in this

way the maintaining of personal values and a

sense of initiative embedded in the organization.

Although our HR Policy does not specify minimum

notice periods, we place special emphasis on

communication with our employees to ensure that

they are informed about important decisions in a

timely manner.

At annual staff meetings, all employees of the

Company receive information directly from the

top management about the results achieved in

the previous year, about the most important tasks

and about the current strategic plans. Staff meet-

Number of employees leaving and joining

2015 2016

Leaving Joining Leaving Joining

MALE 10 8 18 19

Under 30 1 2 1 4

30-50 3 3 6 13

Over 50 6 3 11 2

FEMALE 5 7 1 7

Under 30 2 5 – 3

30-50 3 1 1 4

Over 50 – 1 – –„I have been working at ALTEO Group ever since its foundation. I was the Chief Financial Officer for seven years, after which I took a maternity leave. Apart from professional challenges, it is important to me to be able to align myself to the values of the company. I found both of these at ALTEO Group, the defining values related to being listed ont he stock exchange and operating power plants based on renewable energy and giving a high importance to environmental protection. Furthermore, the company supports flexible working which is made possible by communi-cating openly about one’s career and family plans with one’s superiors.”

Dr. Bea Fodor-Lakatos, Advisor to the CEO


85


ings held at the different premises every half year

also give opportunities for the local managers to

discuss with the employees the events of the past

period, the tasks ahead for the given plants and

the events influencing the activity of the Company.

ALTEO GROUP FAMILY DAY

As the name suggests, the ALTEO Group

Family Day is an occasion for informal meet-

ing and greeting, the aim of which is to allow

all employees and their families to meet and

have fun in collective programs. The first

ALTEO Group Family Day was organized in

2016 with nearly 300 participants, consisting of

100 ALTEO Group employees and 200 family

members. At the Family Day we symbolically

rode 512 km on exercise bikes, representing

is the longest distance between 2 of our work

sites. We also built a huge LEGO cake symbol-

izing how all of our employees are regarded as

valuable ‘bricks’ within the company; 1 piece of

LEGO represented each employee to make the

ALTEO LEGO-cake.

EDUCATION AND TRAINING

Our employees participate in training courses

regularly. The basic objective of the courses is

to increase the efficiency of the employees, the

obtaining of (new) qualifications needed for the job,

and the continuous updating and obtaining of new

knowledge.

Relating to the employment and actual positions

of our employees, we organize mandatory courses

based on internal rules and regulations and on the

Code of Ethics based on the legal regulations. Be-

sides this we also run internal knowledge-sharing

sessions.

The training and development of the employees

is determined based on the Annual Training Plan.

When designing the Annual Training Plan we aim

to include courses which support the implementa-

tion both our annual and long term strategies, and

we consider the requests for courses mentioned

during the discussions in connection with the Per-

formance Assessment Bonus System, as well as

any statutory training needs.

Since we do not track the average training time of

our employees in our existing systems, we cannot

report that here. The collection and systemization

of such data will be reported in 2018.

LOCAL COMMUNITIES

The implementation and operation of an energy

producing facility is a long term process and can

have an effect on the local community for many

decades. On the one hand we have economic

effects, since we create jobs for people, for the

businesses (see more detailed information in the

Indirect economic effects chapter), we pay local

taxes, take part in the development of local

infrastructure and support local organizations.

On the other hand the operation of power plants

can influence the local environment, be it via

emission, noise or sewage discharge. We have

very strict rules about these and measure and

control them in order to minimise potential

damage (see more detailed information in the

Environmental performance chapter).

Our industrial energy-producing activities, environ-

ment pollution and the permissible levels of poten-

tially negative effects and outcomes are correctly

regulated by Hungarian and EU laws. Thus it is of

primary importance to observe the legal rules, also

in terms of the design, implementation and oper-

ation of energy projects. We continuously monitor

changes in legal rules determining our activities

and we meet our compliance requirements.

The responsible person for local community pro-

jects is typically the project manager during the

implementation and the plant manager (power


86


plant manager) in the course of operations. This

makes it possible for all our sites to have a devel-

opment programme supporting local communities.

Dialogue with local communities has an important

role in the life of ALTEO Group, thus we maintain

direct contact with local governments and with civ-

il organizations. In order to better understand their

demands and expectations, our managers meet

them several times per year and coordinate with

the leaders of local governments.

To give the widest possible information about

our activities and to achieve social acceptance

we regularly organize visit-days at our premises,

where we welcome school groups and profession-

al organizations. In the course of these tours, our

employees give detailed information about the

history of the power plants, about the technology,

the machines and equipment used. We have often

hosted students from the University of Miskolc and

from the ELTE Trefort Ágoston Secondary School,

as well as members of professional organizations

MKET and MATÁSZ.

In the framework of supporting tourism we have

opened the Water Power Plant of Felsődobsza to

the public, and it is now a feature of the regional

touristic route. We gave some old equipment and

dismounted machines as presents to the small

town of Felsődobsza, and these were exhibited

in the town center. Besides this we give regular

funding to the local kindergartens, schools and the

Village Day organized once a year.

Mutual support with the populations living in

our direct environments is very important for

us. The procedure for keeping contact with the

localities and for handling complaints from the

inhabitants is regulated by the IMS. We examine

all residential complaints and make the neces-

sary corrective actions and we respond to the

complainant directly. In 2016 we did not receive

any complaint from local communities.

• Girls handball in Balmazújváros

• Handball Sports Club

• Bulls Basketball Club

• Csabai Csirkefogók Waterpolo Club

• Egri Waterpolo Kft.

• Football Club Tiszaújváros

• Railway Sports Club of Miskolc

• Handball Club of Ózd

• Ragály Spartacus Sports Club

• Sajóvámos Sports Club

• Sopron Tigers Sports club

• Tiszaújvárosi Termálfürdő-Phoenix

Basketball Club

• Tatabánya Waterworks Sports club

(“Dragonfly” team)

• Electricity industrial sports coordinators

SUBSIDIZING OF SPORTS:

Supporting sports activities is important for us, therefore we make efforts to support sport clubs organ-

ized by municipalities where we are present. Currently, we support the following organizations:

“The population was very happy about the operation of the local turbine plant. The contacts are very good and are based on cooperation. The programs of the local government have been sup-ported by the company for many years. Furthermore, we owe thanks for gifting the monumental machine unit to us. Since December 2016 the machines of the water power plant of Felsődobsza, the dam and the building are recorded in the historical value repository of the County.” András Luterán, Mayor Felsődobsza


87


STATE AND AUTHORITIES

Contact with the authorities is an extremely impor-

tant part of the contact system of ALTEO Group,

and this is closely related to our energy service

and investment activities. During local authority

meetings, our primary focus is full compliance

with the regulations. This is ensured by the crea-

tion and operation of the contact keeping and data

supply system of ALTEO Group. In order to devel-

op personal and professional relations, we make

efforts to involve and inform the representatives

of the authorities concerned about our activities

beyond the official obligations and opportunities as

well.

As industrial actors we take active part in the

state legislative activity by lodging opinions about

legislative drafts influencing our activity, and by

creating dialogue within the industry. Thus, during

the past years, the General Deputy CEO of ALTEO

Group, as Professional Deputy Chairman of the

Hungarian Cogeneration Society has played an

active role in the coordination with the authorities

of legislation effecting co-generated energy pro-

ducers and has also made efforts to encourage the

creation of a more functional environment for the

producers.

The Company regards as vital all constructive

dialogue with the governmental organizations and

with the representatives of political bodies. But in

order to avoid even the pretence of non-correct

influencing, we remain neutral from a political

point of view, we do not donate to political parties,

neither organizations nor foundations which are

closely related to political parties.

MEDIA CONTACTS

We have less intensive contact with the repre-

sentatives of the media than with other stake-

holders, but we still regard it as important.

Similarly to the wider public, the media players

may also have access to every important docu-

ment about our operations on our website. For

special requests we publish further information,

make statement or give interviews, etc. Oth-

erwise, we are in contact with media actors as

customers, and we mainly publish our adver-

tisements in technical publications.

PROFESSIONAL CONTACTS

ALTEO Group takes part in the work of various rel-

evant organizations in order to play a role in the

determination of common development direc-

tions and to run lobbying activities towards and

in co-operation with governmental organizations.

We are also supporting initiatives and organiza-

tions which support the future vision of ALTEO

Group. In this way we have been supporting the

work of the Regional Center for Energy Policy

Research (REKK) for some years.

The active participation in the work of professional

organizations is not limited only to our member-

ship, but in certain cases we also delegate mem-

bers to the management.

MANDATORY MEMBERSHIPS

INDUSTRIAL CHAMBERS

Several member companies of ALTEO Group,

among them ALTEO Nyrt. are based in Budapest,

thus we are members of the Budapest Chamber of

Commerce and Industry (BCCI). Through our Power

Plant of Sopron we are members of the Sopron

Chamber of Commerce and Industry, and through

our Power Plant in Győr we are members of the

Chamber of Commerce and Industry of County

Győr-Moson-Sopron.

STRATEGIC MEMBERSHIPS

BUSINESS COUNCIL FOR SUSTAINABLE

DEVELOPMENT IN HUNGARY (BCSDH)41

The Business Council for Sustainable Development

in Hungary, BCSDH is the Hungarian organization

of the World Business Council for Sustainable

Development, WBCSD. The purpose of BCSDH is

to promote the introduction into economic practise

of the application of three pillars of sustainable

development (economic profitability, ecological

balance and social quality of life) and to improve,

using innovative solutions, the competitiveness

of Hungary and to contribute to the sustainable de-

41. Further information about the BCSDH at: http://bcsdh.hu/about-us/.


88


velopment of the Hungarian economy and society.

Environment and socially responsible behaviour

have accentuated their roles in the strategy of

ALTEO Group. We attach priority to the stimulation

of good working and social practices following the

sustainability principles of the new generations

and of our partners, therefore we have been mem-

bers of BCSDH since 2013. ALTEO Group takes

active part in several initiatives of the organization –

we were member of the team working out the rec-

ommendation for Hungarian managers containing

complex interpretations of sustainability of compa-

nies and had mentor roles in various development

programs for managers of the future.

Attila Chikán, CEO of ALTEO Group has been the

President of BCSDH since the beginning of 2016

with a mandate for 3 years.

PROFESSIONAL ASSOCIATIONS

Due to our very diversified operation and portfolio

we are members of a number of other professional

organizations. We consider these memberships

of strategic importance, since we are growing in

terms of knowledge-sharing due to these connec-

tions and we can also take part in the future devel-

opment and formation of certain special fields.

Based on our energy trading activities, we are

members of the Hungarian Energy Traders’ Asso-

ciation; by way of our renewable power plants we

are members of the Hungarian Biogas Association,

and of the Hungarian Wind Energy Industrial Asso-

ciation, where our Development Director Levente

Tasnádi-Tulogdi is a Board member. Our colleague,

Attila Kiss is a member of the Economic Committee

of the Hungarian Association of District Heating

Professionals.

Based on our Power Plant operating activities and

maintenance activities we are members of Organi-

zation of Hungarian Industrial Maintainers (MIKSZ).

HUNGARIAN COGENERATED ENERGY

ASSOCIATION

Chairmanship of the Hungarian Cogenerated

Energy Association (MKET) was held by the

Managing Director of Sinergy Kft. from 2007 to

2012. András Papp, who has been the General

Deputy CEO of ALTEO since the ALTEO-Sin-

ergy fusion was also the Technical Deputy

Chairman of MKET in 2016, and our colleague,

Tibor Papp led the Gas Engine Working Com-

mittee. Through the activity of MKET, we are

also able to participate in the development

of the legislative framework of the Hungarian

energy-provision system, and within this mainly

concerning co-generated heat and electricity

generation. The Gas turbine Working Commit-

tee of MKET was set up on our initiative. ALTEO

Group contributes to publishing in the widest

possible realistic circles on topics such as the

advantages and results of co-generated heat

and electricity generation.


89



VII. OUR COMMITMENTS

91


Taks Key Performance Indicator (KPI) Area Responsible Schedule

Publication of integrated report Preparation of integrated report IMS Beatrix Szabó April 30, 2019

Monitoring employees’ training

Proportion of employees involved in monitoring:

2016: 0%

2018: 100%

HR Zsuzsanna Sándor December 31, 2018

Increase of the volume of electricity generated from renewable sources

2016: 43 000 MWh

2020: 65 000 MWhCEO

Attila ChikánAndrás Papp

December 31, 2020

Increase of volume of prevented emission using renewables

Prevented emission (accumulated):

2016: 3 200 tonna CO2e

2020: 50 000 tonna CO2e

Energy production, operation and maintenance division

Viktor Varga December 31, 2020

Reduction of the number of work accidents

Number of work accidents:

2016: 2

2020: 0

IMS Beatrix Szabó December 31, 2020

Assessment of the impact of our operation

True Value survey:

2020: 1

2016: 0

IMS Beatrix Szabó December 31, 2020

OUR COMMITMENTS


VIII. GRI INDEX

93


GRI indicator Description Chapter Page Assurance

Strategy and Analysis

G4-1Statement from the most senior decision-maker of the organization (such as CEO, chair, or equivalent senior position) about the relevance of sustainability to the organization and the organization’s strategy for addressing sustainability

Letter from the CEO 4

Organizational Profile

G4-3 Name of the organization ALTEO Group 21

G4-4 Primary brands, products, and services ALTEO Group 21

G4-5 Location of the organization’s headquarters ALTEO Group 22

G4-6Number of countries where the organization operates, and names of countries where either the organization has significant operations or that are specifically relevant to the sustainability topics covered in the report

ALTEO Group 23

G4-7 Nature of ownership and legal form. ALTEO Group 22

G4-8 Markets served (including geographic breakdown, sectors served, and types of customersALTEO Group

Clients2279

G4-9 Scale of the organization ALTEO Group 22

G4-10 Total number of employees by employment contract and gender Employees 83

G4-11 Percentage of total employees covered by collective bargaining agreements Employees 83

G4-12 Description of the organization’s supply chain Value Chain 45

G4-13 Significant changes during the reporting period regarding the organization’s size, structure, ownership, or its supply chain Company history 21

G4-14 Application of the precautionary approach or principle by the organization Environmental Performance 59

G4-15Externally developed economic, environmental and social charters, principles, or other initiatives to which the organization subscribes or which it endorses

Integrated Management SystemProfessional contacts

3187

G4-16 Memberships of associations (such as industry associations) and national or international advocacy organizations Professional contacts 87

G4-EU1 Installed capacity, broken down by primary energy source Power generation 39

G4-EU2 Energy output broken down by primary energy source Production 52

G4-EU3 Number of residential, industrial, institutional and commercial customer accounts Clients 80

GRI INDEX


94


Identified Material Aspects and Boundaries

G4-17 Entities included in the organization’s consolidated financial statements or equivalent documents Organizational structure 24

G4-18 Process for defining the report content and the Aspect Boundaries About the report 9

G4-19 Material Aspects identified in the process for defining report content. About the report 10

G4-20 Aspect Boundary within the organization for each material Aspect About the report 9

G4-21 Aspect Boundary outside the organization for each material Aspect About the report 9

G4-22 Restatements of information provided in previous reports, and the reasons for such restatements not relevant

G4-23 Significant changes from previous reporting periods in the Scope and Aspect Boundaries not relevant

Stakeholder engagement

G4-24 List of stakeholder groups engaged by the organization Social Performance 78

G4-25 The basis for identification and selection of stakeholders with whom to engage Social Performance 78

G4-26 The organization’s approach to stakeholder engagement Social Performance 78

G4-27 Key topics and concerns that have been raised through stakeholder engagement Social Performance 78

Report profile

G4-28 Reporting period for information provided About the report 9

G4-29 Date of most recent previous report About the report 9

G4-30 Reporting cycle About the report 9

G4-31 Contact point for questions regarding the report or its contents About the report 9

G4-32 GRI content index GRI Index 93

G4-33 Assurance About the report 11

Governance

G4-34 The governance structure of the organization Corporate Governance 29

Ethics and Integrity

G4-56 The organization’s values, principles, standards and norms of behavior such as codes of conduct and codes of ethics Strategy and values 25

Economic Performance

G4-DMA Disclosure on Management Approach (Direct Economic Value) Economic Performance 47


95


G4-EC1 Direct economic value generated and distributed Economic results 49

G4-EC2 Financial implications and other risks and opportunities for the organization’s activities due to climate changeLetter from the CEOStrategy and values

Economic results

42548

G4-EC4 Financial assistance from the governmentEconomic result

The Owner5078

G4-DMA Disclosure on Management Approach (Indirect Economic Impacts) Indirect economic effects 55

G4-EC8 Significant indirect economic impacts, including the extent of impacts Indirect economic effects 55

G4-DMA Disclosure on Management Approach (Availability and Reliability) Availability 53

G4-EU10 Planned capacity against projected electricity demand over the long term Power generation 38

G4-DMA Disclosure on Management Approach (Demand-Side Management) Indirect economic effects 55

G4-EU30 Average plant availability factor Availability 53

Environmental Performance

G4-DMA Disclosure on Management Approach (Energy) Use of energy sources 59

G4-EN3 Energy consumption within the organizationFuel use

Total energy consumption6364

G4-DMA Disclosure on Management Approach (System Efficiency) System efficiency 60

G4-EU11 Average generation efficiency of thermal plants System efficiency 62

G4-DMA Disclosure on Management Approach (Water) Water consumption 71

G4-EN8 Total water withdrawal by source Water consumption 72

G4-EN10 Percentage and total volume of water recycled and reused Water consumption 72

G4-DMA Disclosure on Management Approach (Emissions)Emission

Air Cleannes protection6568

G4-EN18 Greenhouse gas (GHG) emissions intensity Emission 67

G4-EN21 Significant air emissions by type Air Cleannes protection 69

G4-EU5 Allocation of carbon-dioxide emissions allowances or equivalent Emission 65

G4-DMA Disclosure on Management Approach (Effluents and Waste)Soil and water protection

Waste management7374

G4-EN23 Total weight of waste by type and disposal method Waste management 74


96


G4-DMA Disclosure on Management Approach (Environmental Impacts of Products and Services) System efficiency 61

G4-EN27 Extent of impact mitigation of environmental impacts of products and services System efficiency 62

G4-DMA Disclosure on Management Approach (Environmental Compliance) Environmental compliance 75

G4-EN29Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations

Environmental compliance 75

G4-DMA Disaster / Emergency Planning and Response Environmental compliance 75

G4-DMA Disclosure on Management Approach (Process Safety) Environmental compliance 75

G4-OG13 Number of process safety events Environmental compliance 75

Social Performance

G4-DMA Disclosure on Management Approach (Employment) Employees 82

G4-LA1 Total number and rates of new employee hires and employee turnover Employees 84

G4-DMA Disclosure on Management Approach (Labour/Management Relations) Employees 83

G4-LA4 Minimum notice periods regarding operational changes Employees 84

G4-DMA Disclosure on Management Approach (Occupational Health and Safety) Workplace health and safety 76

G4-LA6 Type of injury and rates of injury, occupational diseases, lost days and absenteeism, and total number of work-related fatalities Workplace health and safety 77

G5-LA7 Workers with high incidence or high risk of diseases related to their occupation Workplace health and safety 76

G4-DMA Disclosure on Management Approach (Training and Education) Education and training 85

G4-LA9 Average hours of training per year per employee Education and training 85

G4-DMA Disclosure on Management Approach (Local Communities) Local communities 85

G4-SO1 Percentage of operations with implemented local community engagement, impact assessments, and development programs Local communities 85

G4-DMA Disclosure on Management Approach (Anti-Corruption) Anti corruption 35

G4-SO5 Confirmed incidents of corruption and actions taken Anti corruption 35

G4-DMA Disclosure on Management Approach (Social Compliance) Compliance 34

G4-SO8 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations Integrated Management System 31

G4-DMA Disclosure on Management Approach (Customer and Community Health and Safety) Integrated Management System 31

G4-PR2Total number of incidents of non-compliance with regulations and voluntary codes concerning the health and safety impacts of products and services during their life cycle

Integrated Management System 31


97


G4-DMA Disclosure on Management Approach (Customer Satisfaction) Customer satisfaction 81

G4-PR5 Results of surveys measuring customer satisfaction Customer satisfactions 81

G4-DMA Disclosure on Management Approach (Customer Privacy) Data protection 36

G4-PR8 Total number of substantiated complaints regarding breaches of customers privacy and losses of customer data Data protection 36

G4-DMA Disclosure on Management Approach (Social Compliance)Compliance with providing

products and services35

G4-PR9Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services

Compliance with providing products and services

35

G4-DMA Disclosure on Management Approach (Access) Clients 79


ALTEO Group Sustainability Report 2016

Documents

Transcript of ALTEO Group Sustainability Report 2016